U.S. producer prices jumped in April, with the Producer Price Index up 1.4% from March instead of the 0.5% economists expected. The annual rate hit 6.0%, the biggest increase since 2022.
The price jump spread across services, goods, and energy:
- Services prices rose 1.2% in April, their largest gain in four years, and accounted for nearly 60% of the monthly PPI increase.
- Goods prices increased 2.0%, with energy prices up 7.8% and responsible for more than three-quarters of the broad-based goods rise.
- Gasoline rose 15.6% in April after climbing 19.2% in March.
Gas did much of the damage. Gas prices accounted for 40% of the increase in prices businesses paid last month, while oil shipments remain held up by the blockade of the Strait of Hormuz. Even a deal with Iran would still leave months before those shipments reach American soil.
Households have less room to absorb another round. Consumer prices rose 0.6% in April, pushing the annual rate to 3.8%, the highest since May 2023, while consumer price increases outpaced wage growth largely because of gas.
Businesses also have less room to eat the costs after shouldering much of the burden of Trump’s heftier tariffs over the past year. Core PPI, which excludes food and energy, rose 1% in April and 5.2% from a year earlier.
Kevin Warsh is set to take over from Chair Jerome Powell when Powell’s term ends Friday. Economists expect the Fed to keep its benchmark overnight rate in the 3.50%-3.75% range into 2027. April core PCE estimates now sit as high as 0.4%, after 0.3% in March.
