US producer prices up most since 2022 as energy pain worsens

US producer prices rose in September at the fastest pace in more than four years as higher energy costs reverberated through the US economy.
The producer price index advanced 1.3% from a month earlier, the most since March 2022, and 6.3% from a year earlier, according to Bureau of Labor Statistics data out Thursday. Excluding food and energy, the gauge was up 0.7% last month and 5% from a year ago. Both came in above all estimates in a Bloomberg survey.

The report suggests underlying inflation remains firm alongside rising fuel prices, just ahead of midterm elections in November in which affordability is a central issue. It also likely keeps Federal Reserve officials on track for additional interest-rate increases in the months ahead, especially after a separate report Wednesday showed a key measure of consumer prices rose faster than expected in September.

US Treasuries remained higher and stock futures remained lower after the release.

A key question for policymakers is whether the energy shock is starting to spill into the prices of other goods and services. The PPI report showed energy prices rose 10.8% in September, while transportation and warehousing prices advanced 3.4%, the most since April. Food prices rose 1.2%.

“The jolt to transportation prices affects every good in the economy, since inputs to manufacturing move to factories and goods at all stages of production move from producer to wholesaler to retailer by truck, train or rail,” Carl Weinberg, the chief economist at High Frequency Economics, said in a note. “This is how increases in energy prices ‘bleed through’ to prices of core goods.”

Other Drivers

But there were also other drivers of the hotter-than-expected reading. Wholesale and retail trade services margins jumped 1.4%, the most since April, according to the figures. Margins have been under scrutiny for clues on the extent to which companies are absorbing tariff-related costs or passing them on to customers.

While the Supreme Court struck down many of President Donald Trump’s tariffs earlier this year, the administration is using other authorities to impose levies on imports. A trade war with Canada has also escalated after talks fell apart in August.

Several components of the PPI, which are of particular interest to the Fed because they feed into its preferred inflation gauge — the personal consumption expenditures price index — were more mixed. A gauge of airfares jumped 5% on the month, but various healthcare categories were relatively soft.

Some economists nudged up their estimates for the core PCE deflator after the release, predicting it would rise either 0.3% or 0.4%. The Bureau of Economic Analysis is scheduled to release September PCE price data, along with income and spending figures, on Oct. 29.

What Bloomberg Economics Says

“Producer-price inflation firmed in September as higher energy prices translated to higher transportation costs and wholesalers recovered margins. More important for the Fed, PPI components that feed into PCE — namely airfares — came in above expectations, putting more pressure on PCE inflation.”

— Troy Durie

To read the full note, click here

Thursday’s figures also showed a slight moderation in categories relevant to the data center buildout: The cost of electronic components and accessories fell 0.3% last month, the price of computers and computer equipment edged up 0.1% and an index of broader construction costs was little changed.

Meanwhile, separate reports out Thursday showed US retail sales rose in September by more than forecast as spending at gasoline stations masked mixed spending at other retailers.

And the New York Fed reported the strongest growth in factory activity in that state in almost five years, with significant increases in new orders and shipments. The bank’s October general business conditions index climbed 17.9 points to 25.5, above all estimates in a Bloomberg survey of economists.

Price pressures are also anticipated to remain elevated in the months ahead, according to the New York Fed report. A gauge of expectations for prices paid over the next six months climbed to the highest level since 2022.