WASHINGTON (AP) — U.S. producer prices climbed last month at the fastest pace since November 2022, fueled by a surge in energy prices after the start of the Iran war.
The Labor Department reported Thursday that its producer price index — which captures inflation before it reaches consumers — jumped 6.5% from May 2025. It rose 1.1% from April, as it did the previous month. Wholesale gasoline prices surged by more than 23% from April to May, and nearly
70% from a year earlier.
Inflationary pressures, intensified by the energy shock caused by the Iran war, are frustrating Americans five months before midterm elections that will determine whether President Donald Trump's Republicans keep full control of Congress.
Gasoline prices have been falling in recent days, but the cost of a gallon of regular gasoline has been above $4 since March, according to motor club AAA. And the U.S. driving season, which pushes prices higher each year, has just begun.
Excluding volatile food and energy prices, so-called core wholesale prices rose 0.4% from April and 4.9% from May 2025.
The wholesale inflation numbers came out a day after the Labor Department reported that consumer prices rose 4.2% in May from a year earlier, most in three years. Gasoline prices were up nearly 41% from May 2025. Airfares were up almost 27%.
Inflation is running well ahead of the Federal Reserve's 2% target. The central bank is expected to leave its benchmark interest rate unchanged as its meeting next week. But financial markets expect the Fed could raise rates by the end of the year in an effort to curb price increases.
Wholesale prices can offer an early look at where consumer inflation might be headed. Economists also watch it because some of its components, notably health care and financial services, flow into the Fed's preferred inflation gauge — the personal consumption expenditures, or PCE, index.
Stephen Brown, chief North America economist at Capital Economics, wrote that the producer prices “that feed into the PCE price calculation rose by much more than we expected ... It supports our view that the Fed will hike interest rates toward the end of the year.’’
After the United States and Israel attacked Feb. 28, Iran shut the Strait of Hormuz, causing the biggest disruption in oil supplies in history. Energy prices rocketed. S&P Global Energy warned Thursday that U.S. crude oil inventories are drying up as the summer driving season approaches.
“The bottom line is that U.S. inventory levels remain above estimated minimum operating thresholds,'' said S&P Global Energy's Aaron Brady. “However, with continued disruption to Middle East flows, draws are likely to extend into the third quarter, even in the event of a near-term diplomatic resolution.'' More big, sustained drops in inventories ”would likely signal entry into a ‘danger zone’ for the U.S. refining system.”
