US producer prices post biggest jump in 4-1/2 years in September
US producer prices rose 1.3 per cent in September, the largest gain since March 2022, driven by surging energy and services costs. The annual rate climbed to 6.3 per cent, reinforcing expectations of another Federal Reserve rate hike this month.
US producer prices increased by the most in four and a half years in September amid rising costs for goods and services, the latest indication that inflation is broadening beyond energy products.
The Producer Price Index for final demand jumped 1.3 per cent last month, the largest gain since March 2022, after an upwardly revised 0.5 per cent rise in August, the Labor Department's Bureau of Labor Statistics said on Thursday.
Economists polled by Reuters had forecast the PPI increasing 0.5 per cent after a previously reported 0.4 per cent gain in August. In the 12 months through September, the PPI soared 6.3 per cent, the biggest increase since December 2022, following a 5.6 per cent advance in August.
The government on Wednesday reported a broad increase in consumer prices in September, putting a Federal Reserve interest rate hike this month back on the table.
Producer goods prices increased 2.6 per cent, the largest rise since the government started tracking the series in December 2009. A 10.8 per cent surge in energy prices accounted for more than 80 per cent of the broad-based rise in goods prices, with gasoline prices rising 20.3 per cent. There were also increases in the prices of diesel, jet fuel and residential electric power. The dragging US-Israeli war with Iran keeps oil prices elevated.
Wholesale food prices rebounded 1.2 per cent after declining for three straight months. Excluding the volatile food and energy components, producer goods prices rose 0.3 per cent. Services prices shot up 0.8 per cent after climbing 0.2 per cent in August, with a 1.4 per cent surge in margins for trade services accounting for nearly half of the broad-based increase. There were also increases in the costs of transporting freight by road, hotel and motel rooms as well as airfares. But margins for automotive fuels and lubricants retailing plunged 30.3 per cent, and prices for securities brokerage also fell.
The Federal Reserve tracks the Personal Consumption Expenditures price indexes for its 2 per cent inflation target. Some PPI components feed into the calculation of the PCE inflation measures. Prior to the PPI report, economists' estimates for core PCE inflation ranged from 0.3 per cent to 0.4 per cent in September, which would mean a year-over-year reading of 3.1 per cent. Core PCE inflation gained 0.2 per cent in August and advanced 3.0 per cent on a year-over-year basis.