U.S. producer prices rose at the fastest annual pace since November 2022 last month, driven by a sharp increase in energy costs following the outbreak of the Iran war.
The Labor Department reported Thursday that its Producer Price Index, which measures inflation before it reaches consumers, climbed 6.5% in May compared to the same month a year earlier. On a monthly basis, wholesale prices increased 1.1% from April, matching the previous month's gain.
Wholesale gasoline prices surged more than 23% from April to May and were nearly 70% higher than a year ago. The inflationary pressures, intensified by the energy shock caused by the Iran conflict, are frustrating Americans just five months before midterm elections that will determine whether President Donald Trump's Republican Party retains full control of Congress.
Excluding volatile food and energy prices, core wholesale prices rose 0.4% from April and 4.9% from May 2025. The wholesale inflation data came a day after the Labor Department reported that consumer prices increased 4.2% in May from a year earlier, the largest jump in three years.
Gasoline prices at the pump were up nearly 41% from May 2025, and airfares rose almost 27%.
Inflation is running well above the Federal Reserve's 2% target. The central bank is expected to leave its benchmark interest rate unchanged at its meeting next week, but financial markets anticipate the Fed could raise rates by the end of the year in an effort to curb price increases.
The energy crisis stems from the Feb. 28 attack by the United States and Israel on Iran, which prompted Tehran to shut the Strait of Hormuz, causing the biggest disruption in oil supplies in history.
S&P Global Energy warned Thursday that U.S. crude oil inventories are dwindling as the summer driving season approaches.
"The bottom line is that U.S. inventory levels remain above estimated minimum operating thresholds," said Aaron Brady of S&P Global Energy.
"However, with continued disruption to Middle East flows, draws are likely to extend into the third quarter, even in the event of a near-term diplomatic resolution." He added that more large, sustained drops in inventories "would likely signal entry into a 'danger zone' for the U.S. refining system."
For residents of Modoc County and the town of Likely, the national inflation figures reflect broader economic pressures that may affect local fuel prices and household budgets. While the region is not directly impacted by the conflict, the ripple effects of rising energy costs are felt across rural communities.