Energy Shock Passes Through, U.S. May PPI Sees Largest Increase in Over Three Years

June 11 Persistent inflation pressures tied to the ongoing Iran conflict pushed U.S. producer prices up at their fastest pace in more than three years in May, new data shows. Released Thursday, U.S. Bureau of Labor Statistics figures put May’s producer price index (PPI) at a 6.5% year-over-year jump—the largest increase since November 2022—with a 1.1% monthly rise. Core PPI, which strips out volatile food and energy costs, climbed 4.9% year-over-year. The data underscore mounting strain from the energy price shock triggered by the closure of the Strait of Hormuz on the U.S. economy. With the Iran conflict showing no sign of a near-term resolution, businesses are passing higher energy and transportation costs to consumers, driving up prices for other goods and services. Pairing this with May consumer price data released earlier this week— which showed the fastest rise in U.S. consumer prices in three years—Thursday’s PPI report could further cement market expectations that the Federal Reserve (Fed) will raise interest rates in 2026. The labor market also appears to be regaining strength, shifting the Fed’s current focus to getting inflation under control. (Kylow)