US producer prices post largest increase in 4-1/2 years in September

US 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 percent last month, the largest gain since March 2022, after an upwardly revised 0.5 percent 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 percent after a previously reported 0.4 percent gain in August. In the 12 months through September, the PPI soared 6.3 percent, the biggest increase since December 2022. That followed a 5.6 percent 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 percent, the largest rise since the government started tracking the series in December 2009. A 10.8 percent surge in energy prices accounted for more than 80 percent of the broad-based rise in goods prices. Gasoline prices rose 20.3 percent.

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

Services prices shot up 0.8 percent after climbing 0.2 percent in August. A 1.4 percent 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 percent. Prices for securities brokerage also fell.

The Federal Reserve tracks the Personal Consumption Expenditures price indexes for its 2 percent 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 percent to 0.4 percent in September, which would mean a year-over-year reading of 3.1 percent.

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

Reuters

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