Producer price inflation surged in May and the annual rate increased to 16.4%* (see graph). The reason for the big jump in the May numbers is a huge increase in basic iron and steel, which are measured quarterly. Excluding basic iron and steel, PPI increased 12.2% over the past year, which is roughly in line with expectations. The overall impression from the latest PPI data is one of continued pressure on inflation. After this month's CPI inflation data, the PPI numbers confirm that pressure remains to increase interest rates further.