WASHINGTON, May 13 - U.S. producer prices accelerated more than expected in April, recording the biggest monthly increase since early 2022 and signaling that inflationary pressures were picking up at the producer level amid geopolitical tensions in the Middle East.
The Labor Department’s Bureau of Labor Statistics reported that the Producer Price Index for final demand rose 1.4% in April, following an upward revision to a 0.7% increase in March. Last month’s move was the largest monthly gain since March 2022 and reflected increases across both goods and services.
Economists had anticipated a more modest monthly rise of 0.5% after March’s previously reported 0.5% gain. The stronger-than-expected April reading underlines that producer prices have been rising sharply this year, a trend in part linked to higher energy costs. Officials and analysts point to disruptions in shipping through the Strait of Hormuz amid the war with Iran as contributing to tighter supplies and elevated costs.
Supply chain strains tied to the conflict are reported to have caused shortages and higher prices for a range of inputs, including fertilizers, aluminum and consumer goods. Those shortages and transport disruptions have fed through to producers and helped lift the overall PPI.
On an annual basis, the PPI surged 6.0% in the 12 months through April, the largest year-on-year increase since December 2022, following a 4.0% rise in March. Part of the jump in the 12-month rate reflects lower readings from last year dropping out of the comparison window, magnifying the year-over-year increase in the current data.
The rise in producer prices arrives against the backdrop of accelerating consumer inflation. The Bureau of Labor Statistics reported on Tuesday that the Consumer Price Index also rose further in April, with the annual CPI inflation rate posting its largest gain in three years. Policymakers at the Federal Reserve monitor the Personal Consumption Expenditures price indexes for their 2% inflation objective.
Before the April PPI report, economists had been estimating that core PCE inflation - excluding the more volatile food and energy components - could rise by as much as 0.4% in April after a 0.3% gain in March. Estimates for the year-on-year increase in core PCE inflation were as high as 3.4%; that measure had increased 3.2% in March.
The Federal Reserve left its benchmark overnight interest rate unchanged last month in a 3.50% to 3.75% range. The recent strength in both producer and consumer price measures adds to the data the central bank will weigh as it assesses the path for monetary policy.