U.S. business inflation heating up, could lead to even higher prices for American shoppers

The United States’ economy received a double-whammy of inflation readings this week showing both consumers and businesses are feeling the heat of higher prices amid the U.S. trade war with the world and its outright war with Iran.

And while wholesale, or business inflation, is rising much faster, it raises questions around if, and when, businesses may try to unload more of that inflation pain onto their customers.

U.S. wholesale inflation soared in September to the highest level in more than four years, with the Producer Price Index (PPI) jumping 1.3 per cent from the month before and 6.3 per cent from the same month in 2025.

Both readings topped forecasts from economists, who have warned the sharp rise in oil prices from U.S. President Donald Trump’s prolonged war with Iran are squeezing businesses, particularly with record diesel prices adding to transportation costs.

Even without the effect of higher fuel costs, however, core PPI, which excludes energy, food and trade services, is also running at its hottest pace since October, 2022.

U.S. consumer inflation is also marching higher, numbers released Wednesday showed, with gas prices pushing the annual inflation rate to 3.7 per cent. Core inflation, which excludes food and energy, rose at a slower 2.6 per cent, but that too was hotter than economists expected.

The risk for consumers now is that manufacturers and wholesalers try to pass more of their higher raw material, shipping and transportation costs on to them. Economists sometimes describe the PPI as a bellwether for consumer inflation, though the evidence on that link is mixed.

But the twin reports showing higher-than-expected price increases also reinforces expectations that the Federal Reserve is likely to further raise interest rates before the end of the year, adding to pressure on consumers.

Decoder is a weekly feature that unpacks an important economic chart.