US producer prices rose 1.3 percent in September, the Bureau of Labor Statistics reported on Thursday, more than double the 0.6 percent median forecast and the largest monthly increase since a 1.7 percent rise in March 2022. On a year on year basis final demand prices climbed 6.3 percent, the largest 12 month increase since December 2022, and August’s monthly gain was revised up to 0.5 percent. The print came the morning after September consumer inflation printed at 3.7 percent year on year, above forecasts, and it removes the pipeline relief that might have softened that report.
Energy did most of the damage. Final demand goods prices advanced 2.6 percent, the largest increase since the series was first calculated in December 2009, and the BLS attributed more than 80 percent of that rise to final demand energy, which jumped 10.8 percent. Gasoline alone, up 20.3 percent, accounted for about half of the goods increase, with diesel fuel, jet fuel, residential electric power and crude petroleum also higher, and crude petroleum up 28.3 percent at the unprocessed stage. Food prices rose 1.2 percent, while goods excluding food and energy rose a comparatively contained 0.3 percent.
The underlying measures firmed rather than collapsed, which is what makes the release hard for the Federal Reserve to dismiss as a pure fuel story. Prices less foods, energy and trade services rose 0.5 percent on the month, up from 0.3 percent in August, and 5.0 percent year on year. Final demand services rose 0.8 percent, the largest increase since April, led by a 1.4 percent rise in trade services margins, a 3.9 percent jump in machinery and vehicle wholesaling margins and a 3.4 percent rise in transportation and warehousing prices.
Retail sales, released at the same time, beat on the headline and softened underneath. The Census Bureau put September retail and food services sales up 0.8 percent on the month to 745.0 billion dollars, against a 0.3 percent consensus, with the July to August change revised to 1.3 percent. Sales excluding autos rose 0.9 percent, ahead of the 0.5 percent expected, but the control group that feeds directly into GDP rose only 0.1 percent, below the 0.3 percent forecast and a sharp step down from 1.2 percent in August, a split consistent with gasoline prices inflating the nominal total while volumes cooled. Weekly jobless claims were 199,000, near the 200,000 expected, and the Philadelphia Fed’s October manufacturing index fell to 20.9 from 37.8, below consensus but still in expansion.
Pricing going into the release already had the October 27 to 28 FOMC live: futures put an October hike at roughly 29 to 32 percent on Thursday morning snapshots, up from about 22 percent before Wednesday’s CPI, with a December hike priced near 89.5 percent. No verified post-release snapshot was available at write time. Chair Kevin Warsh speaks in Bangkok later on Thursday, his last scheduled appearance before the October 17 blackout, and producer prices feed the personal consumption expenditures components the committee targets, so September’s pipeline surge now sits directly in the October argument.