Key Points:
Retailer and wholesaler margins fell 1.1% in May — the worst monthly drop in nearly a year. Main Street is eating the cost so you don't see it on the shelf.
Wholesale gasoline jumped 23.4% in a single month. When shop owners can't hold the line, pump prices, groceries, and parts all jump together within weeks.
Pipeline prices are up 12.3% year-over-year — the worst reading since June 2022, when eggs hit six bucks and used cars hit forty grand.
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A friend of mine runs a gas station outside Toledo. He called me Tuesday morning. His fuel truck had just left the lot. The price he paid for that load was 23% higher than last month. He stood there in the rain and stared at his pump sign. He can't raise it another dime. His customers will leave if he does.
So he's eating the loss. Every gallon he sells today, he sells for less than he paid for it.
I can't stop thinking about this.
Here's what worries me. He is not alone. Yesterday the government put out a report nobody on TV read closely. It's called the Producer Price Index. Boring name. Big story.
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Buried in that report was one line. The margins that stores and wholesalers keep for themselves fell 1.1% in May. That's the biggest drop in almost a year. Shops are not charging us more. They are charging about the same. But their own costs went up. So they are keeping less for themselves.
The gas station owner ate the loss. The hardware store ate it. The food wholesaler ate it. The parts counter at the auto shop ate it. The guy who sells tractors ate it.
And then the news yesterday said inflation "cooled." Core prices only went up 0.2% in May. Wall Street cheered. The stock market went up.
I get it. On paper, that looks like good news. But it is not.
Prices look calm because Main Street is taking the hit for us. Your local shop owner is paying war prices for his stock. He is selling it to you at peace prices. That is not a fix. That is a dam.
Dams don't hold when the water keeps coming.
And the water is coming. The same report had another line in it. The stuff still moving through the pipeline toward our shelves is up 12.3% from a year ago. That is the worst number since June of 2022. Remember 2022? Eggs at six bucks. Used cars off the lot for forty grand. Lumber you couldn't find at any price. That kind of pipeline.
I don't think most people realize what this means. The shops can't hold the line forever. They can hold it for weeks. Maybe a month or two. Then they have to raise prices or they go under. Nobody runs a business at a loss for long.
My friend at the gas station said it plain on the phone. "I have weeks." He said it twice. He laughed the second time but it wasn't a real laugh.
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And here's the part that sticks with me. When he breaks, every station on his block breaks the same day. They all buy from the same supplier. They all face the same math. One owner caves and raises his sign. The next morning the rest follow. By Friday the prices on that corner are up forty cents a gallon and you wonder what happened overnight.
Same story at the hardware store. Same at the grocery wholesaler. Same at the parts counter. Same at the lumber yard. The dam doesn't break in one spot. It breaks in a thousand spots at once.
Now look at it from the customer side. People are tired. Mood is the lowest we have ever measured it. 44.8. That's not a recession number. That's an "I'm done" number. Folks are out of room. They can't take another price hike without changing how they live. They are skipping the steak. They are dropping a streaming service. They are putting off the dentist.
So you have shop owners who can't hold the line much longer. And you have customers who can't take it when the line breaks. Both sides are squeezed flat. Something has to give.
Nobody knows when. That's the honest answer. It could be three weeks. It could be three months. The dam holds until the day it doesn't.
What I do know is this. The "cooling" story is a head-fake. The bill is in the mail. We just haven't opened the envelope yet.
I keep picturing my friend at his pump on a Tuesday morning. Rain on the canopy. Truck pulling out of the lot. Fresh invoice in his hand. Same number on his sign as last week. He's going to lose money on every gallon today. He knows it. He smiles at the next customer anyway.
That smile is what's holding inflation down right now. Not the Fed. Not the policy. A guy in a wet jacket pretending it's fine.
It is not fine.
More on this tomorrow.
— Lauren
Editor, American Ledger
