U.S. producer prices rose 1.1% in May on a monthly basis, pushing the annual rate to 6.5%, the highest reading since November 2022, as a 10.7% surge in energy costs driven by the Iran war accounted for the bulk of the monthly increase.

Key Highlights

  • Headline PPI at 6.5% YoY: The Producer Price Index for final demand rose 6.5% year-on-year in May, the largest annual gain since November 2022, up from 5.7% in April.
  • Monthly gain of 1.1%: Final demand prices rose 1.1% on a monthly basis in May, matching April's downwardly revised reading and above the market estimate of 0.7%.
  • Energy drives the surge: Energy prices rose 10.7% for the month, with gasoline alone surging 23.4%. Goods prices overall climbed 2.8%, the largest single-month advance since the data series began in December 2009.
  • Core PPI softer: Core PPI, excluding food and energy, rose 0.4% month-on-month in May, below the 0.5% market estimate, though the broader measure excluding food, energy, and trade services rose 0.8%, the steepest monthly gain since March 2022.

U.S. producer prices increased more than expected in May, official data showed Thursday, as rising energy costs tied to the Iran war pushed annual wholesale inflation to its highest level in three and a half years. The Producer Price Index for final demand rose 1.1% on a monthly basis, matching April's downwardly revised reading and exceeding the market consensus of 0.7%.

On an annual basis, the PPI climbed 6.5% in May, above the market estimate of 6.4% and an acceleration from 5.7% in April. Nearly 80% of the monthly increase was attributable to goods prices, which rose 2.8%, the largest single-month advance since the index series began in December 2009. Energy prices drove the increase, rising 10.7% on the month, with gasoline prices surging 23.4% following a 15.2% gain in April. Food prices increased a more modest 0.6%.

Services prices rose 0.3% in May, decelerating from 0.7% in April. Portfolio management costs climbed 4.8%, accounting for more than 40% of the services gain, while transportation and warehousing services rose 2.6%.

Core PPI, which excludes volatile food and energy components, rose 0.4% on a monthly basis, below the 0.5% consensus and slowing from a downwardly revised 0.7% gain in April. On an annual basis, core PPI held at 4.9%, matching April's revised reading and coming in below the market forecast of 5.4%.

A closely watched underlying measure, the index for final demand excluding food, energy, and trade services, rose 0.8% in May, the largest monthly gain since March 2022, with its 12-month gain reaching 5.1%, the highest since October 2022.

The PPI data followed Wednesday's consumer price index reading showing headline inflation above 4% in May, raising market expectations that the Federal Reserve may be compelled to raise interest rates at some point in 2026.