Dive Brief:
- U.S. producer prices rose last month at the quickest pace since March 2022, the Bureau of Labor Statistics said Thursday, redoubling pressure on the Federal Reserve to resolve an increasingly worrisome outlook for inflation.
- The 1.3% jump in the Producer Price Index in September — 6.3% on an annual basis — exceeded forecasts and followed news of an unexpected 3.7% annual surge last month in the Consumer Price Index. For the 12 months ended in September, the PPI excluding energy, food and trade services rose 5%, suggesting that a war-induced surge in fuel prices is pushing up costs across the economy.
- The PPI and CPI “reports show no sign of inflation moving back to the Fed’s [2%] target, leaving the central bank with ‘more work to do,’ to borrow [Fed Chair Kevin] Warsh’s phrase from his Jackson Hole speech in August,” Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, said in a note.
Dive Insight:
As with consumer prices, the soaring cost of energy accounted for much of the leap in producer prices.
Prices for final demand goods — or physical products alone — jumped 2.6% in September in the biggest increase since data was first gathered in December 2009, the BLS said.
A measure of energy prices spiked 10.8% last month, accounting for more than 80% of the increase in the cost of goods, according to the BLS. Prices for goods excluding energy and foods rose just 0.3% last month.
“The PPI report shows the economy faces persistent inflationary pressure from the global energy shock and its knock-on effects,” Adams said, flagging a surge in prices for agricultural feed products such as corn, hay and oilseeds.
“These will put upward pressure on consumer prices of meat next year,” he said.
The high cost of fuel pushed up the calculation of retail sales last month. Total sales increased 0.8% in September, the Census Bureau said Thursday, largely because of a 6.4% surge in receipts at gasoline stations.
Fed policymakers in recent weeks, and as recently as Wednesday, have voiced no urgency in raising the main interest rate this month after nudging it up by a quarter-point in September.
Fed Vice Chair for Supervision Michelle Bowman said Wednesday that, even with inflation exceeding the Fed’s target, policymakers “have some time to wait and see how financial conditions and the economy evolves.”
“I don't feel any urgency toward taking further action at this point,” she said. “We really need to take some time and understand how things will evolve within the economy.”
Warsh is scheduled to speak Friday at the annual meeting of the International Monetary Fund in Bangkok. It is the final scheduled comment by a Fed official before a two-week blackout period preceding the central bank’s Oct. 27-28 monetary policy meeting.
