US Producer Price Inflation Hits 6.5% in May, Highest Since November 2022, as Iran War Drives Energy Costs Higher

The Bureau of Labor Statistics reported Thursday that the Producer Price Index increased 1.1% in May, matching April's pace and pushing the annual rate to 6.5%, the highest reading since November 2022. Economists had expected a monthly gain of 0.6% and an annual rate of 6.4%, according to CNN. Wholesale gasoline prices surged more than 23% from April to May and nearly 70% compared with a year earlier, according to the Associated Press.

The energy spike is rooted in a major disruption to global oil supply. According to the AP, Iran closed the Strait of Hormuz after the United States and Israel attacked on February 28, producing what S&P Global Energy described as the largest disruption to oil supplies in history. S&P Global Energy warned Thursday that US crude inventories are being drawn down as the summer driving season begins, with the risk of entering a "danger zone" for the US refining system if diplomatic resolution does not materialize quickly.

The figures arrived one day after the Consumer Price Index showed annual consumer inflation reached 4.2% in May — a three-year high — with gasoline up nearly 41% year-over-year and airfares up nearly 27%, per the AP. Core PPI, stripping out food and energy, came in at 4.9% annually on a 0.4% monthly gain, while the measure that also excludes trade services rose 0.8% in May to 5.1% annually, the highest since October 2022, according to CNN.