Wholesale Inflation Explodes: September PPI Surges 1.3%, the Biggest Jump Since 2022, as Annual Producer Prices Hit 6.3%

U.S. producer prices surged in September by far more than economists expected. The producer price index for final demand rose 1.3% on the month, the largest monthly increase since March 2022, and 6.3% from a year earlier, the highest annual rate since December 2022. The report, released Thursday, comes a day after consumer prices also ran hotter than forecast, and it adds to pressure on the Federal Reserve ahead of its October 27-28 meeting.

The September numbers

Forecasts varied by source. Benzinga cited 0.5% and 5.3% for headline PPI, while TipRanks cited 0.6% and 5.5%. Economists expected core prices excluding food, energy and trade services to rise about 0.3%, so the 0.5% gain was also a miss. August was revised to a 0.5% monthly and 5.6% annual gain.

What drove the surge

Energy did most of the damage. Goods prices jumped 2.6%, the largest increase in records dating to 2009, and energy prices rose 10.8%. Gasoline soared 20.3% and accounted for about half of the goods increase. Food prices rose 1.2%. Services prices rose 0.8%, helped by a 1.4% increase in trade margins, the profit spread wholesalers and retailers add, and a 3.4% rise in transportation and warehousing costs.

Upstream pressure is still building

Prices earlier in the supply chain rose even faster, which suggests more cost pressure could work its way toward consumers. Crude petroleum jumped 28.3% and diesel fuel rose 21.0%. Unprocessed goods prices were up 21.5% from a year earlier and processed intermediate goods were up 14.1%, the most since 2022, according to the report details we reviewed. Producer prices are now running well above consumer inflation, which was 3.7% in September, so whether businesses absorb the higher costs or pass them on will matter for the months ahead.

Markets and the Fed

At 8:46 AM ET, Nasdaq 100 futures were down about 1.25% and S&P 500 futures were down about 0.3%, while Dow futures were up about 0.4%, according to TipRanks. Brent crude was around $104 a barrel and WTI around $95. Before the report, futures priced about a 34% to 37% chance of a quarter-point Fed rate hike at the October meeting, a figure that briefly neared 50% after Wednesday's consumer price report, according to a Hawksmore Mirabelis analysis. Fifth Third's Bill Adams said a strong PPI "could tip the balance toward an October hike." We did not find updated rate-hike odds after the release.

The Fed's preferred inflation gauge is based on personal consumption expenditures, not producer prices, and one month of data does not set policy. Still, the pressure comes while the labor market looks soft, with payrolls rising just 29,000 in the latest jobs report. Retail sales, also released Thursday, rose 0.8% in September, or 0.2% excluding vehicles and gasoline stations, according to a DCA Calculator summary of the data. See our CPI report for Wednesday's numbers.