Wholesale Inflation Surges 1.4% Month-Over-Month in April—Far Above Forecasts
U.S. wholesale inflation (Producer Price Index) jumped 1.4% month-over-month and 6% year-over-year in April, well above economist expectations of 0.5% and 4.8%, marking the largest increase since April 2022. The surge reflects the Iran war's impact on energy and supply chains.
Wholesale Price Shock Linked to Iran Conflict
April's Producer Price Index (PPI) surged by 1.4% month-over-month in April while headline prices rose by 6% year-over-year, well above economists' respective forecasts of 0.5% and 4.8%. The largest increase since April of 2022, with final demand services accounting for much of the gains as margins were up 2.7%.
Market Reaction and Fed Implications
Treasury yields have moved higher with the 2yr hovering ~4% and the 10yr ~4.5%, as markets have completely priced out the prospect of rate cuts this year. The odds of a hike by the end of the year have been creeping up now approaching 40%.
Energy's Outsized Role
Energy prices accounted for 40% of the increase, while shelter and food also surged. The price of oil has risen more than 70% since the start of the year, and the average price of a gallon of gas was $4.50.