US producer inflation in May hits highest level since November 2022

US producer inflation rose more than expected in May, reaching its highest annual level since November 2022, according to data released Thursday by the Bureau of Labor Statistics.

The Producer Price Index (PPI) increased 1.1% in May, the same pace as in April, while accelerating from a 0.7% rise in March.

The monthly figure came above market expectations of a 0.7% increase.

On an annual basis, final demand prices rose 6.5% in May, exceeding market expectations of 6.4%. The annual headline inflation rate was the highest since November 2022, when the index advanced 7.4%.

Nearly 80% of the monthly increase in final demand prices was attributed to a 2.8% rise in goods, while prices for services moved up 0.3%.

The increase in goods was the largest since the series began in December 2009. Most of the advance was driven by a 10.7% jump in energy prices, while prices for goods excluding food and energy rose 0.8% and food prices increased 0.6%.

More than half of the rise in goods prices came from a 23.4% surge in gasoline prices. Prices for diesel fuel, jet fuel, plastic resins and materials, industrial chemicals, and natural gas liquids also increased.

In contrast, pork prices fell 10.1%, while prices for residential electric power and sanitary paper products also declined.

Meanwhile, services prices increased 0.3% in May, slowing from a 0.7% rise in April.

The May gain in services was led by a 0.7% increase in prices for services excluding trade, transportation and warehousing. Prices for transportation and warehousing services rose 2.6%, while margins for trade services decreased 1.1%.

More than 40% of the increase in services prices was traced to a 4.8% rise in prices for portfolio management.

Prices for truck transportation of freight, securities brokerage and investment advice, chemicals and allied products wholesaling, food wholesaling, and airline passenger services also rose.

Meanwhile, margins for machinery and equipment wholesaling fell 1.9%, while prices for fuels and lubricants retailing and residential real estate loans also moved lower.

The core PPI, excluding foods, energy and trade services, increased 0.8% in May, marking the largest monthly rise since March 2022.

For the 12 months ended in May, the core PPI rose 5.1%, the largest annual gain since October 2022.