US producer prices spike in May as soaring energy prices fuel largest yearly jump since 2022

Key Points:

• U.S. producer prices surged 6.5% in May 2025, marking the fastest increase since November 2022, driven largely by a 23% jump in wholesale gasoline prices amid the Iran war's impact on energy supplies.
• Core wholesale prices, excluding food and energy, rose 0.4% from April and 4.9% year-over-year, indicating broad inflationary pressures beyond just energy costs.
• Consumer prices also climbed 4.2% year-over-year in May, with gasoline up nearly 41% and airfares rising almost 27%, intensifying inflation concerns ahead of the midterm elections.
• The Federal Reserve is expected to keep interest rates steady in the upcoming meeting but may raise rates later in the year to combat persistent inflation, as producer prices influencing the Fed’s preferred PCE inflation gauge increased more than anticipated.
• Ongoing disruptions in Middle East oil flows have led to declining U.S. crude inventories, raising concerns about potential supply shortages during the summer driving season despite current inventory levels remaining above critical thresholds.