US Producer Prices Rise at Fastest Pace Since November 2022

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(Bloomberg) — US producer prices rose in May at the fastest pace in more than three years as the fallout from the Iran war continued to fan inflation pressures. 

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The producer price index increased 6.5% from a year earlier, the most since November 2022, according to Bureau of Labor Statistics data out Thursday. It advanced 1.1% from April.

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A core measure of prices that excludes food and energy increased 4.9% from a year earlier.

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The report highlights the rising toll the energy-price shock from the closure of the Strait of Hormuz is taking on the US economy. With no quick resolution to the conflict in sight, other goods and services are starting to become more expensive as companies pass on higher energy and transportation costs.

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Combined with other data this week that showed consumer prices rose last month at the fastest pace in three years, Thursday’s release is likely to back calls for the Federal Reserve to raise interest rates in 2026. The central bank is laser-focused on taming inflation now that the labor market seems to be regaining momentum.

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Energy prices rose 10.7% in May, according to the report. Transportation and warehousing costs — which surged in the first two months of the war — continued to advance, posting a 2.6% increase. Trucking freight rates have been on the rise due to war-related fuel surcharges and a shrinking pool of drivers amid President Donald Trump’s immigration crackdown.

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Food prices, meanwhile, rose 0.6%, the most in three months. Grocery costs have been moving higher thanks to a combination of factors including bad weather, the war and tariffs. Fertilizer materials costs were up 28% from a year earlier.

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A measure of inflation pressures earlier in the production process — the cost of processed goods for intermediate demand excluding food and energy — rose from April by the most since 2021.

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Several components of the PPI are also of particular interest because they feed into the the Fed’s preferred inflation gauge, the personal consumption expenditures price index.

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Most of those categories showed strength. Portfolio management fees saw a hefty rebound, rising by the most in almost a year. Hospital impatient care and nursing home care also advanced, though a key measure of airfares fell for the first time since November. The Bureau of Economic Analysis is scheduled to release May PCE price data, along with income and spending figures, on June 25.

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The report also provided updates on two other emerging sources of inflation pressures: data centers and defense production. The prices of electronic components and accessories fell from April for the first time in more than a year, but were still up nearly 27% from May 2025.

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At the same time, prices associated with government purchases for defense were up almost 15% from a year earlier. Census Bureau figures published last month showed defense-related capital goods orders surged in April to the second-highest level on record, with economists citing replenishment of munitions destroyed in the Iran war as one possible driver.

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Details in the PPI report on wholesale and retail trade services margins have also been under scrutiny for clues on the extent to which companies are still passing tariff-related costs to customers. In May, margins contracted by the most in almost a year.

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While the US Supreme Court struck down many of Trump’s tariffs in February, the administration has since proposed new levies of at least 10% on imports from 60 trading partners.

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—With assistance from Giovanna Serafim.

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(Updates with more details beginning in eighth paragraph.)

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