US September Producer Prices Jump 1.3%, Bolstering Case for Fed Rate Hike

More Than Double Market Forecasts

Biggest Increase Since March 2022

U.S. producer prices posted their biggest monthly increase in more than four years in September. Coming after consumer prices also topped expectations, the sharp rise in wholesale inflation is adding to concerns that the Federal Reserve may need to raise interest rates again.

The Labor Department’s Bureau of Labor Statistics said on October 15 that the producer price index rose 1.3% in September from August on a seasonally adjusted basis. That was the biggest increase since March 2022, when it rose 1.7%. It was also well above Wall Street’s forecast of 0.6%. The annual increase widened sharply as well. The PPI climbed 6.3% in September from a year earlier, the largest gain since December 2022, when it rose 6.4%. The figures suggest inflationary pressure is building again at the wholesale level in the United States.

Energy prices led the increase in producer prices. Goods prices rose 2.6% from a month earlier in September, the biggest increase since the government began compiling the data in December 2009. Within that, energy prices surged 10.8%. Gasoline prices jumped 20.3% from the previous month. Gasoline accounted for about half of the increase in goods prices, while diesel, jet fuel and crude oil prices also rose.

The report followed September consumer price data released a day earlier. The consumer price index rose 3.7% from a year earlier in September, above the market forecast of 3.6%. The producer price index measures the prices businesses receive for goods and services. Those prices can feed into consumer inflation with a lag. With both CPI and PPI rising more than expected, concern is growing that progress in slowing inflation may be delayed.

Markets view the latest PPI data as likely to influence the Fed’s monetary policy decision later this month. The central bank is scheduled to hold a Federal Open Market Committee meeting later in October to set its benchmark interest rate.

The Wall Street Journal said the unexpected rise in producer prices could also affect the trajectory of the personal consumption expenditures price index. It added that the balance could tilt toward another increase in the benchmark rate.

Kim Dong-hyun, Hankyung.com reporter 3code@hankyung.com