United States producer prices rose more than expected in May, recording their largest annual increase in three-and-a-half years as higher energy costs linked to the Middle East conflict fuelled inflationary pressures across the economy.
According to the Bureau of Labor Statistics (BLS), the producer price index (PPI) for final demand increased 1.1% in May after an upwardly revised 1.1% gain in April.
Economists had expected the index to rise 0.7% following a previously reported 1.4% increase in April.
On an annual basis, producer prices climbed 6.5% in May, the strongest increase since November 2022. The year-on-year rise accelerated from 5.7% in April.
The latest data adds to signs that inflationary pressures are building after hopes had emerged that easing oil prices would help moderate cost increases.
Those expectations have faded as renewed tensions in the Middle East pushed energy prices higher.
President Donald Trump said on Thursday that the United States would hit Iran "very hard tonight" and soon take control of the country's oil and gas infrastructure and markets.
However, he later reversed course, saying the planned action had been cancelled as negotiations with Tehran progressed.
The inflation report follows data released on Wednesday showing consumer inflation exceeded 4% in May for the first time in three years.
The conflict in the Middle East, now in its fourth month, has driven up energy costs, including gasoline and diesel prices.
Restrictions on shipping through the Strait of Hormuz have also strained global supply chains, contributing to shortages of products ranging from fertilisers and aluminium to consumer goods.
A 2.8% increase in goods prices accounted for nearly 80% of the overall rise in producer prices. The gain, driven primarily by energy products, was the largest since the government began tracking the series in December 2009 and followed a 1.9% increase in April.
Energy prices surged 10.7% during the month, led by a 23.4% jump in gasoline prices. Prices also increased for diesel fuel, jet fuel, plastic resins and materials, industrial chemicals and natural gas liquids.
Food prices rose 0.6%, supported by higher costs for fresh fruits, melons, vegetables, grains and oilseeds.
However, wholesale pork prices fell 10.1%, partially offsetting broader food inflation.
Excluding the volatile food and energy categories, goods prices increased 0.8%, marking the strongest rise since April 2022. Core goods prices had risen 0.7% in April.
A key measure of underlying producer inflation that excludes trade services accelerated 0.8% in May, also representing the largest monthly increase in more than four years. The measure had risen 0.5% in April.
Meanwhile, wholesale services prices increased 0.3% after advancing 0.7% in the previous month. A 4.8% jump in portfolio management fees, reflecting gains in equity markets, accounted for more than 40% of the increase in services costs.
Transportation costs also moved higher. Road freight prices rose 3.4%, while airline fares increased 2.5%. Hospital inpatient care costs climbed 0.5%, and hotel and motel room prices advanced 2.3%.
