Producer prices snapped back in May after an April decline, but the rebound fell short of sparking inflation concerns, suggesting tariffs and supply frictions have yet to bleed broadly into the economy.
The Producer Price Index rose 2.6% on a year-over-year basis, up from April’s upwardly revised 2.5%, according to Thursday’s report from the Bureau of Labor Statistics.
On a monthly basis, the PPI advanced 0.1%, reversing April’s upwardly revised 0.2% decline, and below the 0.2% expected.
Core PPI, which strips out food and energy prices and is a key indicator of underlying inflation pressures, eased to 3% annually from April’s 3.2%. This marks the lowest level since August 2024. On a monthly basis, core PPI inched 0.1%, rebounding from a 0.2% decline in the prior month, below than expected 0.3%.
Thursday’s producer data arrived one day after a softer-than-expected consumer inflation reading. The Consumer Price Index climbed 2.4% year-over-year in May, up slightly from April’s 2.3%, but below the anticipated 2.5% increase.
| Producer Inflation | May 2025 | April 2025 | Expected |
|---|---|---|---|
| PPI YoY | 2.6% | 2.5% | 2.6% |
| PPI MoM | 0.1% | -0.2% | 0.2% |
| Core PPI YoY | 3.0% | 3.2% | 3.1% |
| Core PPI MoM | 0.1% | -0.2% | 0.3% |
In a separate release Thursday, the Department of Labor reported that initial jobless claims rose to 248,000 for the week ending June 7, above forecasts for 240,000. Continuing claims surged to 1.956 million, the highest level since November 2021 and above consensus projections of 1.91 million.
The increase in unemployment filings is further evidence of a softening labor market, potentially giving the Federal Reserve additional room to resume the pace of interest rate cuts.
Fed futures currently price in a near-certainty of a first rate cut by October. Traders are assigning roughly 35 basis points of total easing by year-end, implying at least one full 25-basis-point cut and a high probability of a second.
This is a developing story…
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