The September producer price index came in hotter than economists forecast on Thursday, pointing to continued inflationary pressure from energy amid the US war with Iran.
A measure of underlying inflationary pressure rose 1.3% in September and 6.3% year-over-year, according to the Bureau of Labor Statistics. That marks the biggest monthly and annual gains since March 2022 and December 2022, respectively.
Both readings exceeded the expectations of economists polled by Dow Jones, who predicted an advance of 0.6% for the month and 5.5% for the year.
Energy drove much of that increase as the Middle East conflict reduced oil supplies and sent prices soaring. The PPI measure that excludes food, energy and trade only increased 0.5% in September and 5% compared to the previous year.
But there are signs that rising energy prices are having a downward effect on other categories. BLS said in a release that almost half of September’s increase in refined goods for demand is directly linked to the rise in diesel fuel prices.
This is the latest report in recent days showing that inflation continues to weigh on consumers and businesses.
Wednesday’s release of the consumer price index showed an increase of 0.6% from August to September and 3.7% on a 12-month basis. Economists polled by Dow Jones have predicted growth of 0.6% and 3.6%, respectively.
The so-called core CPI, which removes volatile food and energy costs, increased by 0.3% in the month and 2.6% compared to last year. Economists expect an increase of 0.2% and 2.5%.
Wednesday’s Beige Book, a chronicle of economic activity published by the Federal Reserve, had the highest number of mentions of inflation-related terms, according to analysis from the Bespoke Investment Group.
Retail sales rose 0.8% in September, beating the 0.4% rate expected by economists, according to government data released Thursday. But it marked a slowdown from the previous month, when retail sales rose more than 1%.
Excluding spending on cars and gas stations, retail sales increased 0.25% from August to September, down from around 1.1% in the previous period. This low signals that high prices associated with fuel are causing consumers to tighten their belts elsewhere.
This week’s data has prompted a minority of Fed fund futures traders who expect the central bank to raise rates at its meeting later this month. Traders are now pricing in a nearly 34% chance that the Fed will raise borrowing costs, up from less than 18% a week earlier, according to CME’s FedWatch tool.
“With the second day in a row of higher-than-expected inflation numbers, it looks like the Fed will have no choice but to raise rates again this year,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management.
The report provides some final insight into the rate of inflation in the US ahead of the midterm elections, which could affect the strength of each political party in Washington.