Energy Prices Drive Wholesale Inflation to Its Highest Level Since 2022 — Evening Brief – 06.11.26

U.S. producer inflation accelerated more than expected in May, driven largely by a sharp jump in energy costs tied to the Iran conflict, reinforcing concerns that pipeline price pressures remain stubborn even as growth shows early signs of cooling.

The Producer Price Index rose 1.1% month over month, topping the 0.7% consensus and matching April’s pace, which was revised down from an initially reported 1.4%. On a year-over-year basis, PPI climbed 6.5%, slightly above expectations of 6.4% and up from a revised 5.7% in April. That marks the largest annual increase since November 2022.

Energy was the dominant driver. Nearly 80% of the monthly gain in final demand prices came from a 2.8% jump in final demand goods, the largest increase since the series began in 2009. Roughly 80% of that move reflected a 10.7% surge in energy prices, with gasoline alone up 23.4% on the month, according to the Bureau of Labor Statistics.

Core PPI, which strips out food and energy, rose a more modest 0.4% in May, in line with forecasts and down from a revised 0.7% in April (initially reported as 1.0%). On a 12-month basis, core producer prices increased 4.9%, below the 5.4% consensus and unchanged from April’s revised pace.

The report follows a CPI print that also highlighted the role of higher energy costs in keeping inflation elevated. With geopolitical uncertainty lingering and price pressures proving sticky, futures markets now broadly expect the Federal Reserve to hold rates steady at next week’s meeting and assign rising odds to at least one rate hike by year-end.

Labor data offered a mixed backdrop. Initial jobless claims for the week ended June 6 rose by 4,000 to 229,000, slightly above the 215,000 consensus. The four-week moving average increased to 219,000. Continuing claims edged up to 1.795 million, leaving the insured unemployment rate unchanged at 1.2%, while unadjusted insured unemployment in state programs climbed 3.0% week over week, nearly double the increase implied by seasonal factors.