Wholesale inflation in the United States fell from May to June, largely thanks to a steep drop in energy costs — but escalating conflict with Iran is raising questions about what comes next.
The Labor Department announced Wednesday that its producer price index, which tracks inflation at the wholesale level before it hits consumers, declined 0.3% from May to June. That marks the steepest monthly drop since April 2025 and reverses a 0.6% increase seen the prior month. Looking at the bigger picture, wholesale prices were still 5.5% higher than they were a year ago in June, though that’s a slowdown from the 6% annual increase recorded in May.
Gasoline prices fell sharply — down 12% in June — though they remain nearly 43% higher compared to June 2025, a surge tied to the ongoing war with Iran. Food prices also saw a dip during the month.
When stripping out the more unpredictable food and energy categories, so-called core wholesale prices rose 4.7% compared to a year ago and climbed 0.2% from May.
The wholesale inflation figures came in below what economists had anticipated.
This producer price report followed Tuesday’s release of consumer price data, also from the Labor Department, which showed that consumer prices dropped 0.4% from May to June — the largest single-month decline in four years. On an annual basis, consumer prices were up 3.5% in June, easing from a 4.2% increase in May. The softer-than-expected inflation readings have taken some pressure off the Federal Reserve when it comes to raising interest rates, though inflation is still running above the Fed’s 2% goal.
In his first appearance before Congress since taking over as Fed chair on May 22, Kevin Warsh told lawmakers Tuesday that the central bank has “no tolerance for persistently elevated inflation.”
Energy prices have been climbing since President Donald Trump announced Monday a new blockade in the Strait of Hormuz — a critical waterway through which roughly one-fifth of the world’s oil and natural gas supply travels. With many Americans already struggling under the weight of high living costs, the situation is seen as potentially damaging to Trump’s Republican Party heading into November’s midterm elections.
Wholesale price data can serve as an early signal for where consumer inflation may be heading. Economists pay close attention to it because certain components — particularly healthcare and financial services — feed directly into the Federal Reserve’s preferred inflation measure, known as the personal consumption expenditures, or PCE, index.
