Wholesale prices in the U.S. have seen a slight increase since last month, but inflationary pressures appear to be under control.
The Labor Bureau reported that producers’ price indexes—a measure of inflation experienced by producers before it reaches consumers—rose by 2.6% year-over-year in May.
From April to May, producer prices ticked up by 0.1%, following a 0.2% drop the month before.
If we look at prices excluding the often fluctuating food and energy sectors, wholesale costs have also increased by 0.1% since April and 3% year-over-year.
Interestingly, these numbers came in a bit lower than what economists had anticipated.
Gas prices experienced a 1.6% boost since April after previously declining. On the other hand, wholesale energy prices remained stable. Food prices at the wholesale level grew by 0.1% after a more significant decline of 0.9% in April. Meanwhile, egg prices jumped by 1.4% after plummeting 39.3% the previous month, largely due to the impacts of avian flu. In fact, egg prices have surged 125% since May last year.
This data emerged just a day after the Labor Bureau indicated a 0.1% rise from last April and a 2.4% increase compared to the previous year.
In trade news, since coming back to the office, Trump has imposed 10% tariffs on many countries, targeting sectors like steel, aluminum, and automobiles. This means U.S. importers pay these taxes, which inevitably gets passed onto consumers.
As for inflation trends, economists are cautiously optimistic that improvements might be on the horizon, though the tariffs haven’t drastically altered overall pricing so far.
Wholesale prices can provide some early indicators of potential consumer inflation. Analysts are particularly focused on components such as healthcare and financial services, which feed into the Federal Reserve’s preferred inflation measure, the personal consumption expenditure (PCE) index.
Inflation really started to spike, unexpectedly, around 2021 as the economy rebounded from the effects of the Covid-19 lockdowns. This prompted the Federal Reserve to increase its benchmark interest rates 11 times throughout 2022 and 2023.
The subsequent rise in borrowing costs has contributed to bringing down inflation from its highs last year, with the Fed feeling confident enough to ease rates last year.
However, this year, the central bank has been a bit more cautious, waiting to see the full effects of Trump’s trade policies on inflation.
Looking ahead, the Fed is expected to hold its current rates steady in the upcoming meeting.
“Given today’s data, there’s really no reason for the Fed to consider rate hikes,” noted Carl Weinberg, chief economist at High Frequency Economics. He added that if the Fed hasn’t received plans for additional tariff increases, they might even contemplate how to proceed with interest rate cuts.
