The surge in energy costs is bad, but there’s a lot of inflation from other sources.

By Wolf Richter for WOLF STREET.

The Producer Price Index final demand (PPI), which tracks inflation in prices that companies pay each other, spiked by 1.06% in May from April (+13.4% annualized), seasonally adjusted, for the second month in a row, and both of these month-to-month spikes back-to-back were the worst since the spike in March 2022 (blue in the chart).

Year-over-year, the PPI spiked by 6.4%, the worst since December 2022, according to data from the Bureau of Labor Statistics today (red in the chart).

But it’s not just energy: The 6-month “core” PPI, which excludes food and energy, rose by 6.2%, the worst since August 2022. The 6-month services PPI, also rose by 6.2% annualized, worst since June 2022. The 6-month “core” goods PPI, which excludes food and energy, jumped by 6.6% annualized, worst since August 2022. There is a lot of inflation going on in here.

Energy.

The PPI for energy prices spiked by 10.7% in May from April (not annualized), the third month in a row of steep spikes. This propelled the year-over-year increase to 35.8%.

The chart shows the price level of the energy PPI, rather than the percentage change. The big spikes over the past three months pushed the price level to the peak level of June 2022. Note how rapidly energy prices spiked in 2021 through mid-2022, and how slow they were then in giving up part of that spike. This index tracks all forms of energy that companies pay for, including electricity, which has been relentlessly surging for years under the added demand from data centers.

Inflation beyond energy.

The PPI for core goods, which excludes energy and food components, jumped by 0.75% (+9.5% annualized) in May from April.

The 6-month core goods PPI, which shows the recent trends, spiked by 6.6% annualized. It bottomed out in late 2023 and has been zigzagging higher ever since (red line).

The year-over-year core goods PPI rose by 5.1%, the worst since February 2023.

These were prices that companies paid other companies. In 2025, those prices started to include tariffs that companies were passing on to each other, though consumer-facing companies had a very hard time, or were incapable of passing on those price increases to consumers without losing a lot of sales and market share. So these consumer-facing companies resisted price increases from their suppliers, and that resistance shows up in the much smaller increases that companies paid for the finished goods, as tracked by the finished goods PPI (+3.7% month-to-month, +3.8% 6-month, +3.7% year-over-year).

The services PPI rose by 0.33% in May from April (+4.1% annualized), seasonally adjusted, after the 0.73% spike (+9.1% annualized) in the prior month.

The 6-month average PPI shows the recent trend. Like the core PPI, which it dominates, the 6-month services PPI has been zigzagging higher since the August low.

Within the services PPI:

• Trade services (19% of overall PPI) plunged by 1.1% in May from April, after the 1.3% spike in the prior month.
• Transportation & warehousing services (4.9% of overall PPI) soared by 2.6% in May from April, after already soaring by 3.8% and 2.1% in the prior two months.
• But “other services” (38% of overall PPI) rose by 0.7% in May from April, a sharp acceleration from the 0.1% increase and no change in the prior two months.

Year-over-year, the services PPI rose by 4.9%, a slight deceleration from the prior month, and both were the worst since December 2022 (red line):

Core PPI Final Demand, which excludes energy and food components, rose by 0.42% (+5.1% annualized) in May from April, seasonally adjusted.

Year-over-year, core PPI accelerated by a hair to 4. 9%, the worst since December 2022.

But the 6-month core PPI, which captures the recent trends, accelerated to 6.2%, the worst since August 2022, and it has been rising ever since it bounced off the August 2025 low (red in the chart below).

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