US producer prices jump at fastest pace in four years

US producer prices increased more than expected in April, posting their biggest gain since early 2022, in the latest indication that inflation was accelerating amid the war with Iran, Reuters reports.

The Producer Price Index (PPI) for final demand surged 1.4% last month after an upwardly revised 0.7% advance in March, the Labor Department's Bureau of Labor Statistics said. Last month’s increase was the largest since March 2022, with gains recorded across both goods and services.

Economists polled by Reuters had forecast the PPI would rise 0.5% after a previously reported 0.5% increase in March.

Producer prices have risen strongly this year, partly driven by higher energy costs, as the US-Israeli war with Iran disrupted shipping in the Strait of Hormuz. The conflict has strained global supply chains, contributing to shortages of a wide range of goods, including fertilizers, aluminum and consumer products.

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

The rise in inflation is becoming more broad-based, posing a challenge for the Federal Reserve. The Bureau of Labor Statistics reported that the Consumer Price Index also increased further in April, with the annual inflation rate recording its largest gain in three years.

The US central bank tracks the Personal Consumption Expenditures (PCE) price index for its 2% inflation target.

Prior to the PPI report, economists estimated that PCE inflation excluding volatile food and energy components could rise by as much as 0.4% in April after gaining 0.3% in March. Estimates for the year-on-year increase in core PCE inflation were as high as 3.4%, compared with 3.2% in March.

The Federal Reserve last month left its benchmark overnight interest rate in the 3.50%–3.75% range.

By Vafa Guliyeva