US Sept. PPI Rises by Most in Over Four Years As Inflation Pressures Heat Up Again, Adding New Strain on Fed

TradingKey - On October 15, the U.S. Bureau of Labor Statistics released the September Producer Price Index (PPI). U.S. PPI surged 1.3% month-over-month in September, significantly exceeding market expectations of around 0.6% and marking the largest single-month gain since March 2022; year-over-year, it rose 6.3%, also significantly above August levels, indicating that price pressures on businesses are mounting further.

Data showed that the final demand PPI rose 6.3% year-over-year in September, marking the largest year-over-year increase since December 2022. The month-over-month gain in August PPI was revised to 0.5% from the previously reported 0.4%. Meanwhile, PPI excluding food, energy, and trade services rose 0.5% month-over-month, up from 0.3% in August; year-over-year, it advanced 5.0%, indicating that the price rise was not driven entirely by energy.

By breakdown, energy prices were the primary driver of the sharp PPI increase in September. Prices for final demand goods rose 2.6% month-over-month, the largest increase since data collection for the series began in 2009, led by a 10.8% surge in energy prices. Gasoline prices jumped 20.3% for the month, accounting for about half the increase in goods prices; diesel, jet fuel, and crude oil prices also rose significantly. Meanwhile, prices for final demand services increased 0.8%, with trade service margins up 1.4% and transportation and warehousing services rising 3.4%.

This PPI report comes right on the heels of the U.S. September CPI data released on Wednesday. In September, CPI rose 3.7% year-over-year while core CPI increased 2.6% year-over-year, both pointing to heightened inflationary pressures. Two consecutive hotter-than-expected inflation reports have once again stoked market expectations of further rate hikes by the Federal Reserve.

The Federal Reserve is scheduled to hold its next monetary policy meeting on October 27–28. With both consumer and producer prices accelerating, markets will remain focused on upcoming PCE inflation data and speeches by Fed officials to assess whether another interest rate hike could happen in October or December.