Another surge in gasoline prices last month sent wholesale prices spiking following a slowdown in April, according to government data released Tuesday.
The producer price index (PPI) jumped 0.8 percent in May compared to April, double the increase in the prior month, the Labor Department reported.
Goods prices soared 1.4 percent in the month, with more than two-thirds of that increase caused by rising fuel costs, and 40 percent was attributed to the 8.4 percent jump in gasoline alone, the report said.
However, the data showed food prices were flat.
The headline PPI jump followed a similar resurgence of the consumer price index, which economists had expected would continue to slow.
Red-hot inflation will put pressure on the Federal Reserve to act aggressively to raise interest rates, and has sparked increasing speculation the central bank will make an aggressive 0.75-percentage-point increase this week to signal its determination to cool the economy.
The Fed’s policy-setting Federal Open Market Committee is due to announce its decision on Wednesday at the conclusion of its two-day meeting.
“Following a stinging May CPI print, the latest PPI data confirm that inflation pressures continue to build across both the goods and services sectors, pressuring the FOMC to act decisively to restore price stability,” said Mahir Rasheed of Oxford Economics.
“However, the Fed’s blunt toolkit won’t do much to alleviate supply side disruptions, which remain plagued by the ongoing war in Ukraine and re-imposed social distancing measures in China,” he said in an analysis.
In the latest 12 months, PPI cooled slightly, rising 10.8 percent — a tenth lower than in April and below the 11.5 peak in March.
But Rubeela Farooqi of High Frequency Economics said the rate remains “uncomfortably high,” with costs rising at a near-record pace.
She still believes the Fed will hike interest rates by a half-point but acknowledged “a non-negligible risk of a more aggressive move.”
