Wholesale prices in the United States rose 1.1 percent in May from the prior month and 6.5 percent from a year earlier, the Labor Department said Thursday, the sharpest annual increase since November 2022 and the latest sign that the Iran war is driving an energy shock through the country's supply chain.
The Producer Price Index reading outpaced the 0.6 percent monthly gain forecast by economists polled by FactSet and arrived a day after the Consumer Price Index showed retail inflation running at 4.2 percent, its fastest annual pace in more than three years. Together, the two reports narrow the Federal Reserve's options heading into a policy meeting next week and raise the prospect that wholesale costs still working through factories and freight networks have yet to reach household bills.
Energy drives the move
Nearly 80 percent of the monthly advance came from a 10.7 percent surge in final-demand energy prices. Wholesale gasoline prices jumped 23.4 percent from April and were nearly 70 percent above their level a year earlier, according to the producer price data. Final-demand goods rose 2.8 percent for the month, the largest increase since the series began in December 2009.
The spike has been tied to the Iran war and disruptions around the Strait of Hormuz. The May PPI report captures activity from the prior month, and the question for policymakers is how much of that pressure has yet to reach consumers.
Breadth beyond fuel
The pressure was not confined to the fuel complex. Final demand less foods, energy and trade services climbed 0.8 percent in May, the largest one-month rise since March 2022, and stood 5.1 percent above its year-earlier level — the strongest 12-month gain since October 2022. Core wholesale prices excluding food and energy rose 0.4 percent on the month and 4.9 percent from May 2025.
Final-demand services rose 0.3 percent after a 0.7 percent gain in April, suggesting that the inflation pulse is beginning to move beyond the gas pump and into downstream activity.
Fed pinned in place
The data sharpens the dilemma for the Federal Reserve, which meets June 16-17. Oxford Economics U.S. economist Grace Zwemmer wrote in a research note that the combined CPI and PPI readings point to headline prices rising 0.5 percent in May.
"This would still push headline PCE up to 4.2%, its hottest reading since April 2023," Zwemmer wrote.
Futures markets continue to price a hold at next week's meeting, though this week's data has shifted expectations about how long the Fed can wait before acting.
"When determining the direction of monetary policy, the Fed looks to today's wholesale inflation figures as one piece in the larger puzzle," said Elizabeth Renter, senior economist at NerdWallet. "The likelihood of a rate hike in the coming months has increased with this week's consumer and wholesale inflation data, but the Fed will most likely wait another month before taking that step."
A caveat on duration
Not every read of the May figures points to a sustained climb. Energy-led PPI spikes have historically faded once crude prices stabilize, and whether the Fed treats this as a one-time shock or a broader reacceleration will depend on the core measures, which have so far risen less dramatically than the headline.