Wholesale inflation came in much hotter than expected in September – a sign that Americans could face more pain from soaring energy costs through the holiday season.
The Producer Price Index jumped 6.3% over the past 12 months – the largest annual increase since December 2022 and far above expectations it would cool to 5.3%, the Bureau of Labor Statistics said Thursday.
It rose at a stunning 1.3% pace over the month, much higher than estimates of a 0.5% rate and also the fastest monthly increase since March 2022.
Core PPI – which excludes volatile food and energy costs – rose 0.5% over the month, also above estimates of a 0.3% pace.
Tracy Shuchart, senior economist at NinjaTrader, said the data means more price hikes are on the way, noting that big-box retailers like Walmart and Costco warned on recent earnings calls that they would no longer be able to absorb cost increases.
“We’ll see this going into the Christmas season, certainly, because oil prices and fuel prices have been much higher for much longer than anyone had thought. We’re going on eight months now,” Shuchart told The Post.
On Wednesday, data showed the Consumer Price Index rose 3.7% over the past 12 months through September – also hotter than expected.
“With a second day in a row of higher-than-expected inflation numbers, it seems the Fed will have no choice but to raise rates again this year,” Chris Zaccarelli, chief investment officer for Northlight Asset Management, wrote in a note Thursday.
“While we don’t expect them to raise rates later this month (because it is so close to the midterm election), we do think that they will increase the Fed Funds rate another 25 bps in December.”
The majority of traders are expecting the Fed to hold rates in the key 3.75% to 4% range at their meeting later this month. Traders priced in roughly 65% odds the Fed will hike by a quarter point in December, with some even expecting a half-point hike, according to CME FedWatch.
The Dow Jones Industrial Average rose 318 points, or 0.6%, by approximately 10:30 a.m. ET. The S&P 500 and Nasdaq fell 0.2% and 0.8%, respectively, as tech stocks extended their losses over fears around oversize AI spending.
Wholesale prices for goods jumped 2.6% in September, the largest increase since the data was first tracked in December 2009. Prices for services increased 0.8% over the month.
More than 80% of the September wholesale inflation reading was driven by skyrocketing energy costs, which jumped 10.8% over the month. Gasoline costs rose 20.3%, and diesel-related costs – like jet fuel, electric power and crude petroleum – also increased.
Shuchart noted that shipping rates have increased massively amid the Strait of Hormuz crisis – meaning it costs more to move crude oil from the Middle East to China than it does to launch a SpaceX rocket into space.
“Anything that’s really shipped – food, textiles, furniture,” Shuchart said. “We get a lot of Christmas things from China, decorations, toys. All of those things are going to be more expensive.”
Joseph Brusuelas, chief economist at RSM US, said there’s already evidence that higher energy costs are bleeding into the rest of the economy.
He noted that wholesale food prices jumped 1.2% in September, which “implies some pass through going forward on the back of higher energy and transportation prices.”
Retail sales also increased 0.8% in September, above estimates of a 0.3% rise and largely driven by higher gasoline prices, the Commerce Department’s Census Bureau said Thursday.
President Trump has been eager to tame diesel prices ahead of the November midterms, announcing a deal with Russia as well as efforts to allow more widespread use of tax-exempt diesel and release more crude from reserves.
However, experts have warned these actions could have little impact on US prices at the pumps, especially within the short-term.
While retail sales have remained robust, most of the increased spending has gone toward gasoline and other sectors have come in softer.
The resilient spending has also been split by income, meaning higher-income households are continuing to spend – partially helped by stock market gains – while lower-income Americans are cutting back.