U.S. producer prices increased solidly in May amid a surge in the cost of energy products, suggesting inflation could remain elevated for a while.
The producer price index for final demand rose 0.8% last month after advancing 0.4% in April, the Labor Department said on Tuesday. In the 12 months through May, the PPI increased 10.8% after accelerating 10.9% in April.
Economists polled by Reuters had forecast the PPI gaining 0.8% and climbing 10.9% year-on-year.
Government data last Friday showed a broad increase in consumer prices in May, which raised concerns that inflation was likely become entrenched. Those fears were amplified by a University of Michigan survey last week showing consumers’ five-year inflation expectations jumped to a 14-year high of 3.3% in early June from a final reading of 3.0% in May.
With inflation far exceeding the Federal Reserve’s 2% target by all measures and pressuring consumers, risks of the economy stagnating or plunging into recession next year are growing.
Fed officials are expected to raise interest rates for a third time this year on Wednesday, with a three-quarters-percentage point increase now seen as the likely outcome and the possibility of signals for more large hikes to combat inflation.
Inflation, a global phenomenon, has been worsened by Russia’s unprovoked war against Ukraine, which has boosted oil and grain prices. China’s zero COVID-19 policy is dislocating supply chains, keeping goods prices high. A shortage of workers is driving up wages, resulting in higher prices for services.
Excluding the volatile food, energy and trade services components, producer prices rose 0.5% in May. The so-called core PPI gained 0.4% in April. In the 12 months through May, the core PPI increased 6.8% after rising by the same margin in April.
(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)
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