Producer Prices Jump 1.3% in September, Adding to Fed Hike Pressure

By
Harris
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Key Points

  • Final-demand producer prices rose 1.3% in September, seasonally adjusted, the largest monthly increase since March 2022, the Bureau of Labor Statistics said Thursday.
  • Over 12 months, wholesale prices climbed 6.3%, the biggest annual gain since December 2022; August was revised to +0.5% month over month.
  • Final-demand energy jumped 10.8% and gasoline 20.3%; excluding foods, energy and trade services, prices rose 0.5%.
  • Both the monthly and annual readings beat the Dow Jones consensus of +0.6% and +5.5%, CNBC reported, a day after hotter-than-expected CPI.
  • The Fed meets Oct. 27-28; Wednesday after CPI, CME FedWatch showed about 54% odds of an Oct. 28 hike, CNBC said.

Wholesale inflation accelerated sharply in September, with the Labor Department’s Producer Price Index for final demand rising 1.3% from August on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported at 8:30 a.m. ET Thursday.

The September PPI reading is the largest monthly advance since a 1.7% jump in March 2022. On an unadjusted basis, final-demand prices climbed 6.3% over the 12 months ended in September, the biggest year-over-year increase since December 2022’s 6.4% gain.

What happened

In its Producer Price Indexes news release, BLS said final-demand goods prices rose 2.6% in September, the largest increase since that series began in December 2009. More than 80% of the goods advance came from final-demand energy, which jumped 10.8%. Final-demand foods rose 1.2%, and goods less foods and energy increased 0.3%.

Half of the goods increase traced to gasoline prices, which surged 20.3%. Diesel fuel, fresh and dry vegetables, jet fuel, residential electric power and crude petroleum also rose. Chicken eggs dropped 39.7%, and thermoplastic resins and commercial electric power declined.

Final-demand services advanced 0.8%, matching April for the largest monthly rise since then. Trade services margins rose 1.4%, transportation and warehousing services climbed 3.4%, and services less trade, transportation and warehousing increased 0.3%. Machinery and vehicle wholesaling margins rose 3.9%, while automotive fuels and lubricants retailing margins fell 30.3%.

A closely watched gauge that strips out foods, energy and trade services rose 0.5% in September after a 0.3% gain in August, and was up 5.0% over 12 months. BLS also revised May through August; August’s monthly final-demand increase is now shown as 0.5%, up from the 0.4% first published, and the August 12-month change now stands at 5.6%.

Latest development

Both headline figures came in hotter than Wall Street expected. Economists polled by Dow Jones had forecast a 0.6% monthly rise and a 5.5% annual increase, CNBC reported Thursday.

The print follows Wednesday’s consumer price index, which BLS said rose 0.6% month over month and 3.7% over 12 months, with so-called core CPI (all items less food and energy) up 0.3% and 2.6%, respectively. Gasoline accounted for more than half of the monthly CPI increase, BLS said, rising 9.1% in September.

In early Thursday trading in the Treasury market, the 10-year yield fell more than 13 basis points to about 5.06%, CNBC reported, as investors rotated into bonds amid a flight to safety after the inflation data and pressure on technology shares. The 2-year note yield slipped about 5 basis points to roughly 4.75%, according to the same CNBC report.

Why it matters

Producer prices measure what domestic producers receive for goods and services and often feed into consumer prices with a lag, especially for energy, freight and wholesale margins. A 1.3% monthly jump led by energy keeps pressure on the Federal Reserve just days before its Oct. 27-28 meeting, confirmed on the Fed’s public calendar.

After Wednesday’s hotter CPI, CME FedWatch odds of a quarter-point hike at the Oct. 28 decision rose to 53.7% from 22.1% a day earlier, CNBC reported Wednesday, citing fed funds futures. The federal funds target range stood at 3.75% to 4.00% after the September hike under Chair Kevin Warsh, according to CNBC. On Thursday, CNBC said the PPI data did little to change rate expectations, with fed funds futures still pricing at least one more quarter-point increase by the end of the year, according to the CME FedWatch Tool.

Mortgage rates and other borrowing costs often track the 10-year Treasury yield, so any lasting move in wholesale inflation can matter for households as well as for equity valuations. Recent Fed minutes showed most officials saw another hike likely by year-end, leaving Thursday’s wholesale data as one of the last major inflation prints before policymakers meet.

Intermediate demand also heated up. Processed goods for intermediate demand rose 2.5%, with diesel fuel up 21.0% and accounting for nearly half of that advance. Unprocessed goods jumped 8.4%, led by crude petroleum at +28.3%. Those pipeline costs can show up later in finished goods and consumer prices if they stick.

What happens next

Confirmed: The Federal Open Market Committee meets Oct. 27-28. The next PPI release, covering October 2026, is scheduled for Friday, Nov. 13, 2026, at 8:30 a.m. ET, BLS said. September data on personal consumption expenditures (PCE) prices, the Fed’s preferred inflation gauge, are due from the Bureau of Economic Analysis later this month.

Still uncertain: Whether the energy shock from Middle East supply disruptions keeps feeding into core goods and services, how heavily Fed officials weigh a second straight hike against signs of stress in technology stocks, and whether bond investors keep favoring Treasurys as inflation runs hotter.

For now, the message from the wholesale side matches Wednesday’s consumer print: energy is still dominating the inflation story, and policymakers will have little fresh price data before they gather at the end of the month.

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Sources