Prices soar as spending cools... U.S. producer prices jump 6.3%

[Financial News, New York — Correspondent Lee Byung-cheol] The sharpest rise in U.S. producer prices since 2022 is heightening warnings that inflationary pressures from a surge in diesel prices are spreading across production sites. After the Consumer Price Index (CPI) came in above market expectations the previous day, a sharp rise in the Producer Price Index (PPI) has further intensified pressure on the U.S. Federal Reserve (the Fed) to raise interest rates again.
The U.S. Bureau of Labor Statistics (BLS) said on the 15th (local time) that the September Producer Price Index rose 1.3% from the previous month and 6.3% from a year earlier. The monthly increase was the highest since March 2022, while the annual increase was the highest since December 2022. Both figures were well above market expectations of 0.6% month over month and 5.5% year over year. Core PPI, which excludes volatile food and energy prices, also rose 0.7% from the previous month and 5.0% from a year earlier.
Energy prices are the main cause of the sharp rise in producer prices. The war between the United States and Iran has disrupted crude oil supplies in the Middle East, driving up global oil prices and diesel prices.
What stands out is that rising energy prices are feeding through to the prices of other producer goods. According to the BLS, nearly half of the September increase in prices for processed goods for immediate demand was related to rising diesel prices.
Diesel is widely used in freight trucks, railways, and agricultural and industrial equipment. Rising diesel prices therefore increase transportation and production costs, which can in turn put pressure on companies to raise the prices of their products. In other words, the surge in energy prices is not limited to what consumers pay at gas stations; it is shaking up the cost structure across the U.S. economy.
The surge in producer prices added to the inflationary pressures reflected in consumer price data released the previous day and the Fed’s Beige Book, its report on economic conditions. The September CPI, released on the 14th, rose 3.7% from a year earlier, above the market expectation of 3.6%. It was also up 0.6% from the previous month. Core CPI, which excludes food and energy, rose 0.3% month over month and 2.6% year over year, exceeding market forecasts by 0.1 percentage point in each case.
Concerns about rising prices were also prominent in the Fed’s Beige Book released that day. According to investment research firm Bespoke Investment Group, references to inflation-related terms in this edition of the Beige Book reached their highest level since tracking began.
By contrast, signs of a slowdown are emerging in consumer spending.
September retail sales, reported separately that day, rose 0.8% from the previous month, exceeding the market expectation of 0.4%. However, growth had slowed compared with the previous month, when it topped 1%.
In particular, retail sales growth excluding auto and gas station sales slowed sharply, from about 1.1% the previous month to 0.25% in September. Analysts say that as rising energy prices, including diesel and gasoline, put greater strain on household budgets, consumers are cutting back on spending on other goods and services.




[email protected] Correspondent Lee Byung-cheol Reporter