The numbers: U.S. wholesale prices jumped again in May for the fifth month in a row in a sign that inflationary pressures tied to the reopening of the U.S. economy are likely to persist through the summer.
The producer price index rose 0.8% last month, the government said Tuesday. Economists polled by Dow Jones and The Wall Street Journal had forecast a 0.5% increase.
The rate of wholesale inflation over the past 12 months, meanwhile, escalated to 6.6% from 6.2% in the prior month. That’s the highest level since the index was reformulated in 2009.
Read: Inflation is surging. How high will it go? Check out MarketWatch’s new tracker.
The rate of inflation had turned negative early in the coronavirus pandemic and it was still quite low as recently as the end of last year.
Yet prices began to surge early in 2021 as more people got vaccinated, coronavirus cases sank, the government dished out another massive dose of stimulus money and demand for all sorts of goods and services began to outstrip supply.
Read: U.S. consumer prices soar again and push CPI inflation rate to 13-year high
Big picture: The Federal Reserve contends the recent burst of inflation will peter out by next year. Companies will hire more workers, boost production and satisfy the surge in pentup demand after the economy is fully reopen and operating normally, the argument goes.
The Fed is probably right that inflation will taper off, economists say, but it’s not so clear that the increase in prices will drop to the Fed’s 2% target — and stay there.
Read: Consumers are feeling the pinch from higher inflation and they don’t like it
So far investors aren’t panicking. Stocks remain near record highs and interest rates are still quite low. Chairman Jerome Powell will give more clues on the Fed’s thinking on Wednesday after the central bank’s latest evaluation of the economy.
Market reaction: The Dow Jones Industrial Average DJIA, -0.25% and S&P 500 SPX, +0.18% were set to open slightly higher in Tuesday trades. Most investors don’t appear to be alarmed — for now — about the increase in inflation.
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