Wholesale prices jump to 4-year high and point to even more inflation this summer

By Jeffry Bartash

Producer price index has climbed 6% in past year. Fed rate cuts look even more doubtful.

Wholesale price increases signal a further rise in inflation.

A recap of consumer prices in April showed inflation climbing to a three-year high. Now, the latest look at skyrocketing wholesale prices points to even higher inflation in the months ahead.

The producer price index jumped 1.4% in April, the government said Wednesday, marking the biggest advance in more than four years.

The increase, the sixth-straight large increase, blew past Wall Street's 0.5% forecast.

Higher oil prices were the chief source of trouble as expected, but weren't the only sources of inflation.

Prices also rose for machines, business equipment, transportation, chemicals and other goods and services. These increases point to spillover effects from higher energy costs.

Over the past year, wholesale prices have climbed 6.0%, double the rate at the beginning of the year. That's the highest level since the end of 2022.

Wholesale prices are where inflation shows up first, and these prices tend to hint at future changes in what consumers pay.

Consumer prices have surged this year, pushing inflation to 3.8%, the highest level since 2023. Inflation could soon top 4% before receding, and only then if the Iran war ends and oil prices come back down.

With inflation moving away from the Federal Reserve's 2% goal, the central bank will be hard-pressed to cut interest rates soon, even with new Trump appointee Kevin Warsh set to become chairman.

Related: 5 tests Kevin Warsh will face on the first day as Fed chair

Key details: The headline increase in wholesale prices was exaggerated by a large rise in a category known as retail trade margins that often gyrates sharply from month to month.

Yet a more stable measure of prices, known as the core rate, also rose a stiff 0.6% in April and topped the Wall Street forecast

The 12-month increase in core prices rose to a three-year high of 4.4% from 3.7%.

The core rate strips out volatile food, energy and trade-related costs, giving a more accurate view of inflation trends at the wholesale level.

Big picture: Inflation has been running high since the pandemic, defying efforts by the Fed to reduce it.

Inflation is likely to remain well above 3% until the Iran conflict winds down and oil prices recede. The cost of oil is up 55% since the start of the war.

Stubborn inflation could also discourage senior Fed officials from cutting interest rates this year, an outcome that would be especially painful for homeowners hoping for lower mortgage rates.

Looking ahead: "Much of spike in producer costs is tied to energy costs. It shows up in the data for goods and services. This should be a temporary. The Strait of Hormuz will eventually reopen," said Scott Helfstein, head of investment strategy at Global X ETFs.

"The question is how much pressure the economy can take, both consumers and businesses."

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to open lower in Wednesday trading. Stocks fell after the PPI report.

-Jeffry Bartash

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05-13-26 0919ET