US wholesale inflation accelerated sharply in September, with the producer price index rising 1.3 per cent on the month — the biggest monthly gain in four and a half years — and 6.3 per cent from a year earlier, according to Labor Department data released on Thursday.
The annual rate, the highest since December 2022, followed an upwardly revised 0.5 per cent gain in August and came in at more than double the increase economists had expected. The report extends a bruising week for inflation watchers after consumer prices rose 3.7 per cent on the year a day earlier, and it arrives with midterm elections approaching.
Fuel costs drive the surge
Prices for goods rose 2.6 per cent, the largest increase since the government began tracking the series in 2009. Energy prices surged 10.8 per cent and accounted for more than 80 per cent of that rise, with petrol prices jumping 20.3 per cent in a single month. Diesel, jet fuel and residential electricity also climbed, while food prices rebounded 1.2 per cent after three consecutive monthly declines. Goods prices excluding food and energy still rose 0.3 per cent — a sign the heat cannot be blamed on fuel alone.
What it means for the Fed and households
Services prices rose 0.8 per cent after a 0.2 per cent gain in August, with a 1.4 per cent surge in trade-service margins accounting for nearly half of the increase. Freight transport, hotel rooms and airfares all became dearer. Taken together with the consumer price report, the figures raise pressure on the Federal Reserve to increase its key interest rate, with inflation now above the central bank’s 2 per cent target for more than five years. Bill Adams, chief US economist at Fifth Third Commercial Bank, wrote in a research note that the data show no indication of inflation returning to target, leaving the central bank with “additional work to do”.
The persistence of high prices is also a test for voters heading towards the midterms, with the cost of living polling as the top concern. Technology companies are nonetheless continuing to attract heavy investor interest, and forecasters at the International Monetary Fund have warned the global economy faces a bumpy ride.
