(June 11): US producer prices rose in May at the fastest pace in more than three years as the fallout from the Iran war continued to fan inflation pressures.
The producer price index (PPI) increased 6.5% from a year earlier, the most since November 2022, according to Bureau of Labor Statistics data out on Thursday. It advanced 1.1% from April.
A core measure of prices that excludes food and energy increased 4.9% from a year earlier.
The report highlights the rising toll the energy-price shock from the closure of the Strait of Hormuz is taking on the US economy. With no quick resolution to the conflict in sight, other goods and services are starting to become more expensive as companies pass on higher energy and transportation costs.
Combined with other data this week that showed consumer prices rose last month at the fastest pace in three years, Thursday’s release is likely to back calls for the US Federal Reserve to raise interest rates in 2026. The central bank is laser-focused on taming inflation now that the labor market seems to be regaining momentum.
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Energy prices rose 10.7% in May, according to the report. Transportation and warehousing costs — which surged in the first two months of the war — continued to advance, posting a 2.6% increase. Trucking freight rates have been on the rise due to war-related fuel surcharges and a shrinking pool of drivers amid US President Donald Trump’s immigration crackdown.
Food prices, meanwhile, rose 0.6%, the most in three months. Grocery costs have been moving higher thanks to a combination of factors including bad weather, the war and tariffs. Fertiliser materials costs were up 28% from a year earlier.
The report also provided updates on two other emerging sources of inflation pressures: data centres and defence production. The prices of electronic components and accessories fell from April for the first time in more than a year, but were still up nearly 27% from May 2025.
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At the same time, prices associated with government purchases for defence were up almost 15% from a year earlier. Census Bureau figures published last month showed defence-related capital goods orders surged in April to the second-highest level on record, with economists citing replenishment of munitions destroyed in the Iran war as one possible driver.
Details in the PPI report on wholesale and retail trade services margins have also been under scrutiny for clues on the extent to which companies are still passing tariff-related costs to customers. In May, margins contracted by the most in almost a year.
While the US Supreme Court struck down many of Trump’s tariffs in February, the administration has since proposed new levies of at least 10% on imports from 60 trading partners.
Uploaded by Tham Yek Lee
