Producer Prices Rise Sharply in May as Goods Inflation Accelerates

U.S. wholesale inflation remained elevated in May as producer prices posted another strong monthly increase, underscoring the challenges facing policymakers as they seek to bring inflation back toward the Federal Reserve’s long-term 2% target.

The Producer Price Index for final demand rose 1.1% in May from the previous month, matching April’s revised increase and exceeding economists’ expectations for a 0.7% gain, according to data released by the U.S. Bureau of Labor Statistics.

On a year-over-year basis, producer prices increased 6.5%, up from 5.7% in April and slightly above the consensus forecast of 6.4%.

Much of the increase was driven by goods prices. The BLS reported that nearly 80% of May’s advance in final demand prices was attributable to a 2.8% rise in the index for final demand goods. Prices for final demand services increased a more modest 0.3%.

Core PPI, which excludes the often-volatile food and energy categories, rose 0.4% during the month, matching expectations and slowing from April’s revised 0.7% increase. On an annual basis, core producer inflation held steady at 4.9%, below economists’ expectations of 5.4%.

The report follows Wednesday’s Consumer Price Index, which showed consumer inflation accelerating to 4.2% year over year.