Wholesale prices rose 10.8% in May, near a record annual pace

The producer price index, a measure of the prices paid to producers of goods and services, rose 0.8% for the month and 10.8% over the past year. The monthly rise was in line with Dow Jones estimates and a doubling of the 0.4% pace in April.

Excluding food, energy and trade, so-called core PPI rose 0.5% on the month, slightly below the 0.6% estimate but an increase from the 0.4% reading in the previous month. On a year-over-year basis, the core measure was up 6.8%, matching April’s gain.

The two PPI measures remained near their historic highs — 11.5% for headline, and 7.1% for core, both hit in March.

The data is significant in that prices at the wholesale level feed through to consumer prices, which are running at their highest levels since December 1981. The consumer price index increased 8.6% annually in May, defying hopes that inflation had peaked in the spring.

Federal Reserve officials are watching the inflation numbers closely. Markets now expect the central bank to raise benchmark short-term borrowing rates by 75 basis points when their two-day meeting concludes Wednesday.

For wholesale prices, energy made up much of the May gains. The index for final demand energy rose 5% on the month, part of a 1.4% surge in final demand goods. The goods-services imbalance has been at the core of the inflation pressures, as consumer demand has shifted strongly in an economy that generally is more dependent on services.

Within that energy gain, gasoline rose 8.4%, while multiple other fuel categories pushed higher as well.

The services index advanced 0.4%, with transportation and warehousing services responsible for more than half the gain. The increases were softened by declines in fuels and lubricants, portfolio management and guest room rentals.

Stock market futures pointed to a rebound following the release. Government bond yields pulled back after massive gains Monday, with the benchmark 10-year note most recently yielding about 3.32%.