U.S. Wholesale Prices Show Modest Increase Amid Mild Inflation
WASHINGTON (AP) — The latest figures from the Labor Department indicate that U.S. wholesale prices experienced a modest uptick last month, reflecting persistent but mild inflationary pressures.
Producer Price Index on the Rise
According to the report released on Thursday, the producer price index (PPI), which measures inflation at the wholesale level before it reaches consumers, increased by 2.6% in May 2024 compared to the same month last year. From April to May, producer prices rose by 0.1%, following a slight decline of 0.2% in April.
Core Wholesale Costs Remain Steady
When excluding the highly volatile food and energy categories, wholesale costs still rose 0.1% from April to May and were up 3% year-over-year.
Energy and Food Price Trends
Wholesale energy prices remained stable; however, gasoline prices surged by 1.6% compared to April, recovering from a dip the previous month. Additionally, food prices at the wholesale level saw a marginal increase of 0.1%, following a 0.9% decline in the previous month. Notably, egg prices, significantly impacted by bird flu, increased by 1.4% after a drastic 39.3% decline in April, marking an astonishing 125% rise since last year.
Consumer Prices Also Show Modest Increase
This report comes on the heels of another Labor Department announcement indicating consumer prices also rose modestly by 0.1% from April to May, and were 2.4% higher than a year earlier.
The Impact of Tariffs on Prices
Since his return to office, President Donald Trump has implemented 10% tariffs on nearly all countries, along with specific levies on steel, aluminum, and automotive imports. Although these tariffs are designed to increase import costs—which typically get passed on to consumers—economists currently expect inflation to rise only gradually in the coming months. To date, the tariffs have not significantly affected overall prices.
Looking Ahead: Fed’s Cautious Stance
Wholesale prices are a crucial indicator for predicting future consumer inflation. They are closely monitored by economists, especially since components such as healthcare and financial services directly feed into the Federal Reserve’s preferred inflation measure: the personal consumption expenditures (PCE) index.
Inflation began to accelerate for the first time in decades in 2021, as the economy rebounded unexpectedly from COVID-19 lockdowns. This surge in inflation led the Fed to raise its benchmark interest rate 11 times throughout 2022 and 2023 as a countermeasure. These raised borrowing costs have contributed to a reduction in inflation from its peaks in 2022, ultimately allowing the Fed to lower rates three times last year.
Future Expectations
This year, however, the Fed has adopted a more measured approach as it assesses the potential inflationary impact of Trump’s trade policies. Analysts widely anticipate that the central bank will keep rates unchanged in its upcoming meeting next Tuesday and Wednesday.
Carl Weinberg, chief economist at High Frequency Economics, stated, “There is no incentive for the Fed to debate hiking rates in today’s figures. In fact, if the Fed was unaware of the impending tariff increases, they might even consider cutting rates.”
