US Producer Prices Post Biggest Gain in Four Years as Inflation Rises Broadly

U.S. producer prices posted their biggest increase in four years in April, boosted by soaring costs for goods and services, the latest sign of accelerating inflation amid the war with Iran and presenting President Donald Trump with a political headache at home as he arrived in Beijing for meetings with China’s leader.

The larger-than-expected rise in the Producer Price Index reported by the Labor Department on Wednesday followed on the heels of news on Tuesday of another solid increase in consumer prices, which resulted in the annual inflation rate advancing at its fastest pace in three years.

Rising inflation, stoked by the U.S.-Israeli war with Iran, is exerting financial pressure on households. Trump, on his way to China on Tuesday, said “I don’t think about Americans’ financial situation” in making decisions as he seeks to negotiate an end to the war, adding ​that preventing Tehran from acquiring a nuclear weapon is his top priority.

The increase in inflation is becoming pervasive, posing a challenge for the Federal Reserve. Financial markets expect the U.S. central bank to keep its benchmark overnight interest rate in the 3.50%-3.75% range into 2027.

“The jump in input prices portends further increases for consumer prices in May,” said Ben Ayers, senior economist at Nationwide. “We expect the hawkish wing of the FOMC to advocate for an extended pause in interest rates even with incoming Fed Chair Kevin Warsh likely to prefer to lower rates over time.”

The PPI for final demand surged 1.4% last month, the largest rise since March 2022, after an upwardly revised 0.7% advance in March, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast the PPI gaining 0.5% after a previously reported 0.5% increase in March.

Producer prices have increased strongly this year, partly driven by higher energy costs, as war disrupted shipping in the Strait of Hormuz. The conflict is straining global supply chains, causing shortages of a wide range of goods, including fertilizers, aluminum and consumer products.

In the 12 months through April, the PPI jumped 6.0%. That was the largest increase since December 2022 and followed a 4.3% rise in March. Part of the surge in the year-on-year PPI rate reflected last year’s low readings dropping out of the calculation.

U.S. stocks opened mixed. The dollar advanced against a basket of currencies. U.S. Treasury yields rose.

Broad Increase in Prices

A 1.2% increase in services accounted for nearly 60% of the jump in the monthly PPI. The biggest advance in services in four years was driven by a 2.7% surge in margins received by wholesalers and retailers, indicating that businesses were passing on rising costs to consumers.

Margins for machinery and equipment wholesaling shot up 3.5%. There were also increases in margins for professional and commercial equipment wholesaling as well as apparel, jewelry, footwear and accessories retailing. Margins for fuels and lubricants retailing surged 26.6%.

The cost of transporting freight by road increased. Prices for legal services rose as did wholesale airfares, though the pace slowed from March.

But portfolio management fees fell. Prices for hotel and motel rooms also dropped. Healthcare costs rose marginally. These are some of the measures that go into the calculation of the Personal Consumption Expenditures price indexes, which are tracked by the Fed for its 2% inflation target.

Wholesale goods prices increased 2.0% after rising 1.9% in March. A 7.8% jump in energy prices accounted for more than three-quarters of the broad-based rise in goods prices. Wholesale gasoline prices increased 15.6%, adding to the 19.2% surge in March. Food prices rebounded 0.2%. Excluding the volatile food and energy components, producer goods prices shot up 0.7% after rising 0.3% for two straight months.

With the PPI and CPI data in hand, economists estimated core PCE inflation could rise by as much as 0.4% in April after gaining 0.3% in March. Estimates for the year-on-year increase in the so-called core PCE inflation were as high as 3.4%. It increased 3.2% in March.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci )

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