Wholesale prices jumped 6.3% annually in September, biggest gain since 2022
September producer prices were expected to increase 0.6% month-over-month and 5.5% annually, according to the consensus estimate by Dow Jones.
Key points
- September PPI rose 1.3% monthly and 6.3% annually, the largest gains since 2022.
- Energy costs from the U.S. war with Iran drove much of the increase.
- Fed funds futures now price a nearly 34% chance of a rate hike on Oct. 28.
U.S. wholesale prices rose 1.3% in September and 6.3% over the prior 12 months, the Bureau of Labor Statistics reported Thursday. Those were the largest monthly and annual gains since March 2022 and December 2022, respectively.
Both figures exceeded forecasts by economists polled by Dow Jones, who had expected 0.6% for the month and 5.5% for the year. The report pointed to continued inflationary pressure from energy amid the U.S. war with Iran.
Energy drives increases
Energy accounted for a large share of the gains as the Middle East conflict reduced oil supply and pushed prices higher. Core PPI, which excludes food and energy, rose 0.7% for the month and 5% annually.
The BLS said almost half of September's increase in processed goods for immediate demand was tied to higher diesel fuel prices, indicating downstream effects.
With a second day in a row of higher-than-expected inflation numbers, it seems the Fed will have no choice but to raise rates again this year
— Chris Zaccarelli, investing chief at Northlight Asset Management
Other inflation signals
Wednesday's consumer price index showed a 0.6% monthly increase and 3.7% annual rise, with core CPI up 0.6% and 2.6%. The Fed's Beige Book recorded the highest number of inflation-related mentions on record, according to Bespoke Investment Group.
Retail sales grew 0.8% in September, above the 0.4% forecast but slower than the prior month's gain of more than 1%. Excluding autos and gas stations, sales rose 0.25%, down from about 1.1%, suggesting high fuel prices are leading consumers to cut other spending.
Traders now assign a nearly 34% probability to a Fed rate hike on Oct. 28, up from under 18% a week earlier, per CME's FedWatch tool. About 90% expect at least one hike by year-end.
