Higher gas prices sent wholesale inflation soaring last month, likely signaling more pain ahead for consumers

By Elisabeth Buchwald, CNN

(CNN) — The war with Iran is squeezing US businesses at a rate not seen in nearly four years, and it’s likely to cause them to raise prices for consumers even more.

The Producer Price Index, a measure of wholesale inflation, increased in April to 6% on an annual basis from 4% in March, well exceeding economists’ expectations. On a monthly basis, the index increased 1.4%, according to data released Wednesday by the Bureau of Labor Statistics. That’s twice the pace that economists expected.

A 15.6% increase in gas prices accounted for 40% of the increase in prices businesses paid last month.

Even when excluding the volatile categories of food and energy, core PPI rose 1% for the month, pushing the annual rate to 5.2%.

What this means for consumers

Wednesday’s report does not guarantee consumers will see prices rise at the same rates that businesses are experiencing. Companies can try to pass along their higher costs, but they also have to weigh whether consumers are willing — or able — to pay more.

In the current environment, where Americans are already seeing consumer price increases outpace wage growth — largely a result of the jump in gas prices — they have less power to absorb higher costs.

At the same time, businesses also have less room to absorb elevated costs, having already shouldered much of the burden of President Donald Trump’s heftier tariffs over the past year. That means at least some of their added expenses are likely to be passed on to consumers. The question is how much.

This story is developing and will be updated.

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