The U.S. producer price index (PPI) rose 0.1 percent from April to May, according to a Bureau of Labor Statistics (BLS) report released yesterday. The median forecast in a Bloomberg survey of economists called for a 0.2 percent increase. Excluding food and energy, the PPI also increased 0.1 percent.
This latest PPI report follows May consumer price data that showed a fourth-straight month of tame inflation. While the impact of higher tariffs has so far been modest for Americans, economists see price pressures building in the second half of the year as companies look to pass costs on to their customers.
“We see no sign in today’s figures of any shock to prices from tariffs. Indeed, it is hard to find any components of this release that increased at all” after President Donald Trump’s April 2 tariffs announcement, Carl Weinberg, chief economist at High Frequency Economics, said in a note.
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The data show wholesaler and retailer margins expanding in May—particularly for vehicle and machinery wholesaling—after declining a month earlier. Margins have seesawed month to month this year, underscoring uncertainty around the impact of trade policy on prices and demand.
Goods prices excluding food and energy rose 0.2 percent. The data contained scattered signs of possible tariff-related price increases, including the largest increase in consumer durable goods costs since January 2023 and a pickup in capital equipment. Those advances were offset by modest inflation in energy, food, and other non-durable goods. Services prices increased 0.1 percent, mostly reflecting the pickup in wholesaler margins.
A separate report showed that recurring applications for U.S. unemployment benefits rose to their highest level since the end of 2021, adding to evidence that it is taking unemployed Americans longer to find a new job.
Analysts pay close attention to the PPI report because some of its components are used to calculate the Fed’s preferred measure of inflation, which is based on the personal consumption expenditures (PCE) price index. Those categories were soft in May: Airfares and portfolio management fees declined, while healthcare costs were also tame. The PCE report will be published later this month.
U.S. companies have struggled to navigate twists and turns in the Trump administration’s trade policies in recent weeks, after the president announced substantial duties on the country’s trading partners in April. On Wednesday, the White House announced a deal with China that would leave tariffs on many Chinese goods well above the rate before Trump took office. Trump also said he intended to send letters to trading partners in the next one to two weeks setting unilateral tariff rates, ahead of a July 9 deadline to reimpose higher duties on dozens of economies.
The costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, barely rose. Unprocessed goods prices fell for a third-straight month.
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