In May, US wholesale inflation rose a modest 0.1 percent from the previous month. All of this is drawn from the most recent data published by the Bureau of Labor Statistics. That’s on the heels of the Producer Price Index (PPI) reporting a surprise 0.1% drop in prices paid to producers this month. This move is big, even when measured against last month’s decrease. In other words, economists were expecting a bigger boost, with projections calling for a 0.2% increase in May.
Just a few months ago, this same PPI jumped to 2.6%, year over year. This jump was in line with economists’ predictions for the twelve-month period ending in that month. This marks a reversal from the 0.2% decline in April. That decline was largely the result of increased tariffs, courtesy of the Trump administration, which forced wholesalers and retailers to absorb the higher costs.
The PPI data, released on Thursday, underscores the inflection point for inflationary trends in the U.S. so far this year. After raging for such a long time, inflation has remained peaceful so far in 2023. That slight increase in the PPI suggests it’s going to be a different story soon. Economists were already expecting inflation to ramp up, particularly at the producer level. The May figures are a good early indication of just how strong a trend this might be.
The 0.2% decrease in April was especially dramatic, highlighting how macroeconomic trends can dramatically shift the pricing landscape across sectors. Wholesalers and retailers experienced squeezed margins, which helped drive down overall producer prices. President Trump’s tariffs are nothing if not an ill-conceived scheme to raise prices on consumers. Third, this would add to the already troubling complexity of inflationary trends.
CPI data showed inflation for goods and services, as measured by the consumer price index, rose sharply. Yet, this increase was only half the amount that most analysts had expected. Meanwhile, wholesale prices have begun to spike. Consumers may not be experiencing the immediate effects of those shifts in wholesale or production costs into retail prices quite yet.
The PPI is a key leading indicator of future retail-level inflation. In other words, economists and analysts at all levels will be watching these trends very closely in the coming months. Consumer prices are strongly tied to producer prices. When one moves, the other is usually forced to move with it.
As inflation dynamics continue to shift, it is important more than ever for stakeholders from both the public and private sectors to be prepared for a changing market. The Bureau of Labor Statistics collects and releases some of the most important data used to understand economic trends. This sort of information should have major impacts on how producers and consumers operate.