Wholesale inflation surges again and keeps the pressure on businesses and the U.S. economy

By Jeffry Bartash

Producer-price index records biggest back-to-back increase since 2022

Wholesale prices are going up, up, up.

Wholesale prices in May posted the biggest back-to-back increase since 2022, keeping the pressure on businesses as they try to navigate another wave of U.S. inflation.

The producer-price index climbed 1.1% last month to match the increase in April, the government said Thursday. Wall Street had forecast a 0.7% increase.

Wholesale prices have risen 6.5% in the past 12 months to mark the largest one-year advance since late 2022.

Even with their own costs rising, businesses so far have not tried to pass all of these new expenses along to their customers, who are resistant to paying more after five years of higher inflation.

Consumer prices rose 4.2% in the past year, and a measure that omits energy has risen a more modest 2.9%.

Still, some of the increase in wholesale prices is bound to make its way to consumers. Wholesale prices are where inflation shows up first, and these prices tend to hint at future changes in what consumers pay.

Key details: Higher oil and gas prices weren't the only reason wholesale inflation shot up again in May.

A separate price gauge known as the core rate, which strips out energy, rose a sharp 0.8% in May. That's also the biggest increase since 2022.

The 12-month increase in the core rate moved up to 5.1% from 4.4%.

Energy is still having the biggest impact on wholesale prices, however. They rose 11% in May at the wholesale level. Prices of products made from oil derivatives, such as plastic resins and chemicals, also rose sharply.

Less worrisome was a 0.3% increase in the cost of wholesale services in May. That had risen more than twice as fast in April.

Services is a quirky category, too. These prices rose in May because of a category tied to finance, known as portfolio management, that shows higher "prices" when the stock market goes up.

Big picture: Just one year ago, inflation was slowing toward the Fed's 2% target and the central bank was planning more interest-rate cuts.

Now rate cuts are on hold, and as the rise in wholesale prices show, there's still plenty of inflation in the guts of the economy that's likely to show up later in the year. Consumers and businesses can't expect much price relief anytime soon.

Looking ahead: "Inflation is proving difficult to fully eliminate," said Steve Rick, chief economist at financial-services provider TruStage.

"While prices have come down from their peak, businesses are still facing higher costs for labor, transportation and energy, and some of those costs will eventually find their way to consumers," he said.

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to open higher in Thursday.

-Jeffry Bartash

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

06-11-26 0927ET