Producer prices surged in September, delivering another troubling inflation report just one day after consumer prices rose more than expected, according to the latest Producer Price Index (PPI) from the Bureau of Labor Statistics.
- The PPI jumped 1.3% in September, accelerating from August’s 0.5% increase and marking the largest monthly gain since March 2022. Economists had expected a much smaller 0.5% increase.
- On an annual basis, producer inflation climbed to 6.3%, the highest since December 2022 and well above expectations of 5.4%.
Why it matters: The report suggests inflationary pressures are building throughout the supply chain. While energy was overwhelmingly responsible for the surge, prices for services, transportation and other business inputs also increased, raising concerns that companies could eventually pass additional costs along to consumers.
Energy prices explode: Prices for final demand goods jumped 2.6%, the largest increase since the series began in December 2009. More than 80% of that increase came from energy, which surged 10.8%.
- Gasoline prices alone jumped 20.3%, accounting for half of the entire increase in goods prices.
- Diesel, jet fuel, residential electricity and crude petroleum also moved higher.
The pressure is spreading: Service prices rose 0.8%, driven partly by a 3.4% jump in transportation and warehousing costs. Wholesale margins increased 1.4%, including a 3.9% increase for machinery and vehicle wholesalers.
- Food prices also climbed 1.2%, while goods excluding food and energy increased a more modest 0.3%.
Some prices actually fell: Chicken egg prices plunged 39.7%, while retail margins for automotive fuels and lubricants dropped 30.3%. Prices for plastic resins, commercial electricity and certain financial services also declined.
The bigger concern: Inflation pressures are building earlier in the production process. Prices for unprocessed goods used by businesses surged 8.4%, led by a 22.2% increase in energy materials.
- Crude petroleum alone jumped 28.3%.
- Meanwhile, processed goods used as business inputs rose 2.5%, with diesel prices climbing 21.0%.
The bottom line: September’s PPI report reinforces concerns that inflation is accelerating again. Energy explains much of the headline shock, but rising transportation costs, wholesale margins and underlying producer prices suggest the problem extends beyond oil. That’s unwelcome news for the Federal Reserve and the bond market, where persistent inflation could keep Treasury yields and mortgage rates elevated.