Prices for wholesale goods in the United States charged forward by 10.8% in May from the same time last year, the latest reminder that inflation is continuing to rampage across the economy.
On Tuesday, the Labor Department released its latest data for the Producer Price Index (PPI) and it found that wholesale prices rose by double digits again in May following an 11% jump recorded in April. As in previous months, the surge in wholesale inflation was driven by rising energy prices.
According to the Labor Department, nearly 70% of the increase revolves around a 5% rise in energy products. The fresh data also estimates that a 40% in the surge in final demand goods were connected to higher prices for diesel fuel, gasoline prices and residential natural gas.
Prices at the pump have been felt acutely across the U.S. since Russia launched its war in Ukraine on Feb. 24. The American Automobile Association (AAA) has estimated that the national average price for a gallon of gas has risen above $5, with the highest prices recorded in California at $6.40 per gallon.
When more volatile food and energy prices are excluded, prices rose by 0.5% on a monthly basis, slightly higher than the 0.4% seen in April. Inflation in the service sector moved up 0.4%, double the 0.2% seen in April, led primarily by a 2.9% price hike for transportation and warehousing services.
The PPI numbers come one day after a similarly brutal Consumer Price Index (CPI) reading for May that saw inflation roar back by 8.6% after a slight retreat. Both figures suggest a dwindling of purchasing power for many American households, a fact that has contributed to a deterioration in consumer confidence.
The new numbers are sure to raise pressure on the Federal Reserve to take a bolder stance on interest rates. Last month, the central bank initiated a half-percentage point rate hike in a bid to tamp down inflation and to gauge how markets would react. Analysts expect a 0.75% hike this time.
The hike was the largest by the central bank in over 20 years as the Fed aims to avoid tipping the U.S. economy into a recession. Fed Chairman Jerome Powell acknowledged that the road ahead was filled with recessionary risks and that there were variables beyond the Fed's control.
