SouthernWorldwide.com – Inflation impacting U.S. businesses experienced a significant increase in May, reaching its highest point since November 2022, largely due to escalating energy costs influenced by the Iran war.
The Producer Price Index (PPI), which tracks inflation at the wholesale level before it affects consumers, saw a year-over-year increase of 6.5% in May, according to a report from the Labor Department. On a monthly basis, the PPI climbed 1.1% from April, exceeding the 0.6% rise predicted by economists surveyed by FactSet.
This higher-than-anticipated figure follows a day after the Consumer Price Index (CPI) report, which indicated a surge in May, with an annual inflation rate of 4.2% – the fastest pace in over three years. While the PPI doesn’t directly predict consumer price changes, it can contribute to broader inflation if businesses pass on these increased costs to their customers.
The latest data highlights a substantial shift in the nation’s inflation trends this year, with gasoline prices remaining notably high. The resurgence of inflation is also likely to maintain the Federal Reserve’s cautious stance, leading some Wall Street economists to suggest that policymakers might be more inclined to raise interest rates rather than lower them.
The Federal Reserve is widely expected to keep interest rates unchanged at its upcoming meeting scheduled for June 16-17, as officials continue to analyze the most recent inflation data.
“In determining the direction of monetary policy, the Fed considers today’s wholesale inflation figures as one component of a broader economic picture,” stated Elizabeth Renter, senior economist at NerdWallet, in an email. “The probability of an interest rate hike in the near future has risen with this week’s consumer and wholesale inflation data, but the Fed will most likely wait another month before implementing such a measure.”
Wholesale gasoline prices saw a significant jump of over 23% between April and May, and a nearly 70% increase compared to the same period last year, as indicated by the PPI data. Although gas prices have seen a slight decrease in June, the most recent PPI report does not reflect this change as it is based on data from the preceding month.
When excluding the volatile prices of food and energy, the so-called core wholesale prices rose by 0.4% in May compared to the previous month, and by 4.9% from May 2025.
Wholesale prices can serve as an early indicator of future consumer inflation trends. Economists also monitor this index because certain components, particularly in healthcare and financial services, are incorporated into the Personal Consumption Expenditures (PCE) index, which is the Fed’s preferred inflation measure.
“With both the May CPI and PPI data now available, our current estimate for PCE points to a 0.5% increase in headline prices and a 0.3% rise in core prices for May,” noted Grace Zwemmer, U.S. economist at Oxford Economics, in a research note. “This would push headline PCE up to 4.2%, its highest level since April 2023.”
