Wholesale prices surged 1.4% in April, the largest monthly gain since March 2022, as energy costs spiked and pipeline inflation pressures spread across the broader economy, the Bureau of Labor Statistics reported Wednesday.
The producer price index blew past the 0.5% Dow Jones consensus forecast and the upwardly revised 0.7% increase recorded in March. On an annual basis, the index climbed 6%, the biggest year-over-year increase since December 2022. Excluding food and energy, the core PPI rose 1%, well above the 0.4% estimate. Excluding food, energy, and trade services, the index was up 0.6%.
Energy was at the center of the move. Some three-quarters of the gain in goods prices came from a 7.8% jump in final demand energy, with more than 40% of that traced to a 15.6% surge in gasoline. Prices at the pump soared well past $4 a gallon during the month as pressures from the Iran war hit the broader energy complex.
The BLS data showed the price pressures were not limited to fuel. The services index accelerated 1.2%, also the biggest monthly gain since March 2022. Two-thirds of that move came from a 2.7% rise in trade services, a sign that tariff costs could be starting to have a larger impact on prices. A 3.5% jump in margins for machinery and equipment wholesaling added to the move.
"Inflation is sticky and accelerating. The core reading confirms a deeper structural trend, especially in services," said David Russell, global head of market strategy at TradeStation. "The Hormuz crisis is aggravating the problem, but this goes way beyond oil."
The report came one day after the BLS said the consumer price index rose 3.8% from a year ago, driven primarily by surging energy prices but also by a surprisingly high increase in shelter costs. Core consumer inflation came in at 2.8%, still well above the Federal Reserve's 2% target.
Market pricing following the PPI release pointed to little chance of interest rate cuts through the rest of the year, with odds for a rate hike climbing to about 39%. The Fed has kept its benchmark rate in a range between 3.5% and 3.75%.
Futures tied to the Dow Jones Industrial Average fell following the release while Treasury yields were mildly positive.
The inflation data sits inside a broader economic disruption tied to the war. According to CNBC, oil benchmark Brent crude hit $104 a barrel earlier in the week, up 44% since the start of the war, and a gallon of regular gasoline averaged $4.50 nationwide on Tuesday, up 44% compared with last May. Diesel was up 61%, according to AAA data cited by CNBC.
Oil prices were little changed Wednesday as investors monitored a fragile Middle East ceasefire and awaited a summit in Beijing between President Donald Trump and Chinese leader Xi Jinping, scheduled for Thursday and Friday. Brent crude futures were down 14 cents to $107.63 a barrel, while U.S. West Texas Intermediate edged up 44 cents to $102.62, according to Reuters. Both benchmarks have hovered around or above $100 per barrel since the U.S.-Israeli war on Iran began at the end of February, after which Tehran effectively shut the Strait of Hormuz.
The Strait normally carries about a fifth of the world's oil and liquefied natural gas. The International Energy Agency said global oil supply would not meet total demand this year as the war continues to disrupt Middle Eastern production. The IEA also reported that Russia's crude oil production declined by 460,000 barrels per day in April from a year earlier to around 8.8 million barrels per day as Ukraine ramped up drone attacks on energy targets. OPEC also lowered its forecast for world oil demand growth in 2026.
"The market remains highly reactive to every update from the region, meaning sharp swings are likely to persist. Any further escalation or direct threat to supply flows could quickly revive strong upside momentum in both Brent and WTI," said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Analysts at JPMorgan wrote in a note to clients Monday that while a temporary shock can be absorbed, a prolonged disruption cannot. The analysts concluded that because the mounting damage is so severe, Iran or the U.S. will back off by June.
"A temporary shock, even a large one, can be absorbed. A prolonged disruption cannot," the analysts wrote.
Trump departed Tuesday for Beijing, telling reporters he planned to discuss Iran with Xi. "We're going to have a long talk about it," Trump said. He also said he did not expect to need China's help to resolve the conflict. "I don't think we need any help with Iran," Trump said. China is the largest buyer of Iranian oil despite ongoing sanctions pressure from the Trump administration.
