The Labor Department reported Wednesday that its producer price index, which tracks inflation before it hits consumers, increased 1.4% in April. This was its largest monthly gain since March 2022.
This means that producer prices rose nearly 6% from a year earlier. This was the most since December of 2022, as the 10-week Iran war pushed up energy prices, putting pressure on companies to pass along higher costs to consumers.
Highlights of the current economic data include…
1 – Energy prices climbed 7.8% last month and 22.7% from a year earlier.
2 – Gasoline soared 15.6% in the same year.
3 – Diesel also jumped 12.6%.
4 – Did I mention that Fuel Oil jumped a mere 54%?
All of the increases were much higher than economists had forecast.
On Tuesday, the Labor Department reported that its closely watched consumer price index jumped 3.8% last month from April 2025. This was the biggest year-over-year increase in more than three years as energy prices continued to climb.
Overall, it’s obvious that inflation has again reared its ugly head.
Let me leave you with this…
Wholesale prices can offer an early look at where consumer inflation might be headed. Economists also watch it because some of its components, notably health care and financial services pricing, flow into the Commerce Department’s personal consumption expenditures price index, which is the Fed’s preferred inflation gauge.
The April report was the latest sign that the interest rate cuts that markets were pricing in at the start of the year were probably no longer probable.
Four months ago, the big question for the Federal Reserve was whether it needed to keep cutting interest rates to support what appeared to be a shaky labor market. But the labor market has steadied for the time being, putting even more importance on the inflation data.
Now, the policy debate within the Fed has shifted away from when to cut rates to when it will begin signaling that a rate hike is as likely as a rate cut. Huh? Really?
Ultimately, a great deal hinges on whether or when fuel and commodities resume flowing through the Persian Gulf. If they do, the inflation arithmetic gets easier in a hurry because officials don’t have to worry about second-round effects of higher energy prices and product shortages.
High prices ate into households’ purchasing power last month. Inflation-adjusted average hourly earnings declined 0.3% in April from a year earlier. That marked the first time that inflation outstripped annual growth in paychecks since April of 2023.
Consumer sentiment hit a record low in April, largely due to soaring prices at the pump.
Prices are rising at time when Americans are already frustrated by the high cost of living. Affordability is likely to be a key issue when voters go to the polls November 3rd to determine who will maintain control of the Senate and the House of Representatives.
I’ve presented a lot of economic data in the past few paragraphs. And in keeping with the fact that my only job is to annoy and confuse, here’s a bit more…
Artificial intelligence continues to affect the workplace as each new month brings a wave of job-cut announcements from large employers like Nike, Walmart, and Morgan Stanley.
Layoffs in the first four months of the year totaled 300,749, according to outplacement firm Challenger, Gray & Christmas. This was 50% lower than the same period last year when federal-worker job cuts dominated the start of the new administration’s second term.
Private-sector layoffs were 10% lower than this time last year as AI upended workplaces in a real fashion.
Tech was hit hardest, with firms letting go of more than 85,000 employees so far this year, a 33% increase over the same period in 2025, Challenger data showed. And the job cuts keep coming, with fresh announcements in May of thousands more layoffs at Paypal and Coinbase.
And meanwhile, back at the ranch, every dollar sitting in your bank account has lost 6% of their buying power in the past fourteen months.
What does all of this mean? Change is in the air…
Will inflation continue on its current path? Will interest rates rise or fall in the near future?
Will employment levels hold or drop sharply as AI permeates the workplace? Will our economy hold up, or will it be forced into a recession? If I had a crystal ball, I wouldn’t need to do tax returns to make a living.
No one knows the answer. But it does mean that we all need to be cautious in managing our businesses.
1 – Watch your monthly financial statements like a hawk. Maintaining your margins during a period of rapid change like this is job #1.
2 – If you need to raise your prices or cut jobs, get to it already.
3 – Be conservative and put new projects on hold. You don’t want to be left without a chair if the music stops.
The company you save might be your own.
Four months ago, no one saw any of this coming and only God knows what will happen in the next four months. So let’s dig a hole, shoulder a weapon, and do what we do best.
Protect our businesses.
But do so knowing that you’re not alone. I’m right there with you, shoulder to shoulder. Between the two of us, we’ll get it done. We always do. If you need to talk, you know my number.
As always, if you’re having problems with your accounting or tax work, schedule a complimentary appointment with me for some tax planning and advice. You’ll be glad you did.
We’re all going to get through this. Let’s get through it together…
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.AccountingSolutionsLtd.com
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