A key inflation reading capturing wholesale prices rose again in May

U.S. suppliers’ prices rose in May amid higher food and energy costs, adding to pressure on inflation. The producer-price index, which measures what suppliers are charging businesses and other customers, rose a seasonally adjusted 0.8% in May from the prior month, up from a 0.4% monthly gain in April, the Labor Department said Tuesday. Producer prices had moderated somewhat in April, after the March gain had been the highest since records began in 2010, pushed up by surging energy prices after Russia invaded Ukraine. The so-called core price index—which excludes the often-volatile categories of food, energy and supplier margins—rose 0.5% after a 0.4% gain the prior month.

On an annualized basis, the PPI rose 10.8% in May from a year ago, down slightly from a revised 10.9% in April. May marked the sixth consecutive month of double-digit annual gains for producer prices. Economists are watching producer- and consumer-price indexes closely for signs that inflation could be peaking. With the annual increase in consumer prices ticking back up in May to 8.6%, Federal Reserve officials are contemplating a larger-than-expected 0.75-percentage-point interest-rate increase at their meeting this week. Continued pressure on producer prices often signals future rises in consumer inflation as costs pass through supply chains. Elevated producer prices suggest that consumer prices “would continue to have upward pressure in the coming months,” said PNC economist Kurt Rankin. While the relationship between the two measurements is indirect, that pattern has been consistent as the economy emerges from its pandemic-induced slowdown. May’s jump in consumer inflation didn’t come as a total surprise because “PPI was telling us that this number was coming, that inflation was going to stay high in response to higher oil prices,” Mr. Rankin said.