US wholesale inflation hits 6.5%, highest since 2022

US wholesale inflation hits 6.5%, highest since 2022

US wholesale inflation has surged to its highest level since November 2022, mainly due to rising energy costs amid the ongoing Iran war.

The Producer Price Index (PPI) increased by 6.5% in May compared to the same month last year, the Bureau of Labor Statistics reported Thursday.

This is the fastest pace since a similar spike in late 2022 due to high energy prices and supply chain disruptions.

Fed may raise interest rates again

The PPI also saw a monthly rise of 1.1%, matching its April increase and beating the expected 0.7% gain.

Clark Bellin, president and chief investment officer of Bellwether Wealth, noted that "Thursday's elevated PPI print is yet another data point that could push the Federal Reserve to hike interest rates."

He added this inflationary spike is likely temporary but there are concerns about a prolonged Iran conflict leading to higher oil prices and inflation.

Core PPI numbers

The core PPI, which excludes food and energy, rose a modest 0.4% over the month. This suggests that much of the higher inflation rate is being driven by energy costs as the Strait of Hormuz remains largely blockaded.

Without food, energy and trade services, the PPI rose 0.8%—its largest monthly gain since March 2022—and gained 5.1% annually at its fastest rate since October 2022.

Energy prices soar

A whopping 80% of the increase in final demand goods prices was due to a 10.7% spike in energy prices in May alone.

The gasoline index skyrocketed by 23.4%, with other energy-related costs such as diesel, jet fuel, plastic resins and materials also seeing significant increases.

Higher energy costs are now affecting everything from food and clothing to airfares.