U.S. producer prices jump at fastest pace in more than four years

U.S. producer prices increased by the most in 4-1/2 years in September amid rising costs for goods and services, the latest indication of inflation broadening out beyond energy products.

The Producer Price Index for final demand jumped 1.3 per cent last month, the largest gain since in March, 2022, after an upwardly revised 0.5-per-cent rise in August, the Labor Department’s Bureau of Labor Statistics said on Thursday.

Economists polled by Reuters had forecast the PPI increasing 0.5 per cent after a previously reported 0.4-per-cent gain in August. In the 12 months through September, the PPI soared 6.3 per cent, the biggest increase since December, 2022. That followed a 5.6 per cent advance in August. The government on Wednesday reported a broad increase in consumer prices in September, putting a Federal Reserve interest rate hike this month back on the table.

Producer goods prices increased 2.6 per cent, the largest rise since the government started tracking the series in December 2009. A 10.8 per cent surge in energy prices accounted for more than 80 per cent of the broad-based rise in goods prices. Gasoline prices rose 20.3 per cent.

There were also increases in the prices of diesel, jet fuel and residential electric power. The dragging US-Israeli war with Iran keeps oil prices elevated.

Wholesale food prices rebounded 1.2 per cent after declining for three straight months. Excluding the volatile food and energy components, producer goods prices rose 0.3 per cent. The so-called core goods gained 0.4 per cent in August.

Services prices shot up 0.8 per cent after climbing 0.2 per cent in August. A 1.4 per cent surge in margins for trade services accounted for nearly half of the broad-based increase in services prices.

There were also increases in the costs of transporting freight by road, hotel and motel rooms as well as airfares. But margins for automotive fuels and lubricants retailing plunged 30.3 per cent. Prices for securities brokerage also fell.

The Federal Reserve tracks the Personal Consumption Expenditures price indexes for its 2-per-cent inflation target. Some of the PPI components feed into the calculation of the PCE inflation measures. Prior to the PPI report, economists’ estimates for core PCE inflation ranged from 0.3 per cent to 0.4 per cent in September, which would mean a year-over-year reading of 3.1 per cent.

Core PCE inflation gained 0.2 per cent in August and advanced 3.0 per cent on a year-over-year basis.