In Tuesday’s producer price index report, the inflation rate dropped 0.5 percentage points from the previous month. However, forecasters’ decline was less than expected, adding to worries about inflation.
Tuesday’s news signals more pain to come for households. The producer price index gauges the wholesale prices of goods ultimately passed down to consumers.
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“Price pressures remained high, with final demand goods up sharply for a fourth consecutive month, while final demand services held steady,” said economists with Oxford Economics.
The news came right after a report for April revealed that consumer prices increased by 8.3% — near the fastest annual rate in four decades. The high inflation rate has harmed President Joe Biden politically and undercut support for his spending proposals.
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Excluding food, energy, and trade services, core PPI rose 0.6% in April and 6.9% from a year ago, the latter a decline from 7.1% last month.
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Both monthly increases were exactly in line with Dow Jones estimates. Headline PPI rose 1.6% in March, while the core was up 0.9%.
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To drive down inflation, the Federal Reserve has started increasing interest rates. In March, the central bank announced that it would raise its interest rate target by a quarter of a percentage point to bring down the higher prices.
This month, the Fed announced that it would increase its interest rate target by half a percentage point. The Fed generally increases rates incrementally by just a quarter of a percentage point, so the more assertive approach is akin to two rate hikes at once and shows that the central bank is increasingly anxious about growing prices.
Republicans have been holding on to both the Fed for its supposed slowness in acting and the Biden Administration for trillions of dollars in spending during President Joe Biden’s first year in office.
There are also concerns that the Fed’s actions could cause the economy to crater into a recession, which would damage Democrats going into this year’s midterm elections.
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Those numbers came the day after the BLS reported that consumer prices for goods and services in the marketplace rose 8.3% from a year ago, down from 8.5% in March but still indicative of the worst inflation the U.S. has seen since the early 1980s.
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A separate economic report Thursday showed that jobless claims equaled 203,000 for the week ending May 7, an addition of 1,000 from the previous period. That was above the Dow Jones estimate for 194,000.
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Continuing claims fell, however, dropping by 44,000 to 1.343 million, the lowest level since January 3, 1970.
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