Boiling PPI Follows Scorching CPI, Pushing Traders to Raise Hike Probabilities: May 13, 2026

A second consecutive day featuring a hotter-than-expected inflation report is driving interest rates north with this morning’s 6-handle PPI causing concerns among analysts that price pressures could potentially broaden throughout the economy. The 40-month high was a substantial beat from the 4.9% estimate and is weighing on Fed easing prospects, with some fixed-income players thinking that a hike by year-end could be in the cards. Indeed, there’s only a 1% chance of a cut by the central bank’s December meeting but a 35% probability of an increase during the same time frame. The hot numbers arrive just as Kevin Warsh is gearing up to take the helm of the monetary policy institution as folks wonder if the committee will look through Middle East developments as a one-time energy shock or perceive it as a threat that could spread to the sellers of goods and services.

Equities Post Narrow Gains as Investors Assess PPI

Stocks are advancing in narrow fashion, as the cyclically oriented equities are getting battered by tighter financial conditions. Only 3 of the 11 major sectors are gaining, including tech, materials and communication services, as traders await the possibility of good news from China that could fuel more AI momentum. Still, the S&P 500 has reached a fresh record. Commodities ex gold are appreciating across the board and the greenback is stronger. Volatility protection instruments are near their flatlines.

Wholesale Prices Jump at Fastest Rate Since Early 2022

The fastest monthly increase in wholesale inflation since March of 2022 sent the April Producer Price Index (PPI) to its speediest annualized lift going back to December 2022. The 49- and 40-month highs for the two metrics illustrate the adverse effects of the Middle East war, as the bumps in fuel and food charges are starting to spread to core goods and services at the wholesale level, pointing to upward momentum on upcoming Consumer Price Indices (CPI) since the two indicators have traditionally maintained a lead-lag relationship. April’s PPI jumped 1.4% month over month (m/m) and 6% year over year (y/y), much higher than the 0.5% and 4.9% expected. The following categories and the extent of their m/m changes contributed to the headline increase:

• Energy, 7.8%
• Transportation/warehousing, 5%
• Trade services, 2.7%
• Core goods, 0.7%
• Food, 0.2%
• Other services, 0.1%

No major category provided cost relief while overall services climbed 1.2%.

Economy Faces Elevated Risk of Spreading Inflation

With the services aspect of the PPI expanding faster than core goods, risks of inflation spreading across the entire economy are elevated. Granted, the oil shock is a one-time event, but once firms raise their selling charges, the increases tend to be stickier and are unlikely to accompany subsequent declines in crude oil costs. The 2022 crisis offers significant lessons related to spikes in gasoline expenses. As the effects of pain at the pump broaden to goods and especially services, the Fed has been unable to steer the nation towards its 2% objective since 2021. The amplification of price pressures leads firms to focus on margin expansion after input costs fall, and that’s a real concern for inflation expectations. For stock market traders, however, there’s hope that the US and China this week will have productive discussions that can extend the rally for AI stocks.

International Roundup

Euro Area Hiring, Manufacturing Slow

Employment grew by 0.5% y/y and 0.1% quarter over quarter (q/q) compared to 0.7% y/y and 0.2% q/q in the final three months of 2025. The q/q expansion was slightly stronger than the economist consensus estimate for no change. Employment during the first quarter climbed from 176,412k to 172,613k.

Industrial production, furthermore, was mixed in March. It increased 0.2% m/m, which matched February’s pace and missed the economist consensus estimate for a 0.3% jump. Relative to the year-ago period, however, production was down 2.1%, compared to the 0.8% slip in February and the economist estimate for a 1.7% drop. Output of intermediate goods, capital goods, and durable consumer goods were up 0.9%, 1.1% and 0.5% m/m. Production of energy and non-durable consumer goods, conversely, descended by 1.5% and 4.5%.

Wage Growth in Australia Meets Expectations

Wage growth in Australia during the first quarter continued at nearly the same rate as in February and matched expectations, according to the Australian Bureau of Statistics. During the first three months of the year, paychecks grew 0.8% q/q and 3.3% y/y. While the q/q rate was unchanged from the fourth quarter of 2025, the y/y pace slowed slightly from 3.4%. Private and public sector wages ascended 0.8% and 0.5% q/q. When compared to the year-ago period, private and public sector earnings climbed 3.2% and 3.3%.

Loan Initiation Weakens in Australia

The number of new loan commitments during the first quarter sank 6.2% and the value dropped 3.8% q/q. The volume of loans for new owner home purchases, furthermore, was down 6.9% and commitments from investors sank 5.3%.