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The Bureau of Labor Statistics reported that the Producer Price Index for final demand rose 1.3 percent in September, the largest monthly advance since March 2022. This followed an upwardly revised 0.5 percent increase in August and topped economists’ forecasts for a 0.5 percent gain. In the 12 months through September the index climbed 6.3 percent, the strongest yearly increase since December 2022.
According to the Labor Department final demand goods prices advanced 2.6 percent in September, the biggest rise since the government began tracking the series in December 2009. Energy prices jumped 10.8 percent and accounted for more than 80 percent of the broad-based goods increase while gasoline prices surged 20.3 percent. Final demand services prices rose 0.8 percent with increases also recorded in trade services and transportation and warehousing.
BLS figures show that the index for final demand less foods, energy and trade services increased 0.5 percent after a 0.3 percent gain the prior month. On a 12-month basis this core measure advanced 5.0 percent. Wholesale food prices rebounded 1.2 percent following declines in the three previous months.
Reuters reported that the PPI data followed a hotter-than-expected consumer price report the previous day, raising the prospect of a Federal Reserve interest rate increase at the late October meeting. Financial markets saw roughly a 30 percent chance of a rate hike at the October 27-28 policy meeting according to CME Group’s FedWatch Tool. One economist told Reuters that for the Fed this represents an increasingly uncomfortable combination where the cost of waiting rises if inflation fails to cool.
A Reuters assessment found that price pressures are broadening beyond energy with producer goods prices excluding food and energy up 0.3 percent. The report noted that the US-Israeli war with Iran has kept oil prices elevated, contributing to the surge in fuel costs. Processed goods prices climbed 14.1 percent over the past year, the largest 12-month increase since August 2022.
The Bureau of Labor Statistics release also coincided with other economic data showing weekly jobless claims remaining below 200,000 for a fifth straight week. Retail sales beat expectations in part due to higher gasoline prices although underlying trends indicated some slowing. These figures together with the PPI data are expected to factor into Federal Reserve deliberations on the appropriate path for monetary policy.
