U.S. wholesale inflation delivered an unexpected surge in September, with producer prices rising 1.3% monthly and 6.3% annually—both substantially above forecasts. The annual rate marks the highest level since December 2022.
The October 15 report came just hours after consumer inflation data also exceeded expectations, presenting Federal Reserve policymakers with consecutive inflation readings. Energy costs drove the wholesale advance, with the Bureau of Labor Statistics reporting a 20.3% monthly increase in gasoline prices.
Broad-Based Price Pressures
Final demand goods prices advanced 2.6% in September, their largest monthly increase since the series began in December 2009. According to the BLS, over 80% of the broad-based rise was attributable to energy, which jumped 10.8%. Prices for final demand foods and goods excluding foods and energy increased 1.2% and 0.3%, respectively.
Services also saw price pressures, with prices advancing 0.8%. Transportation and warehousing costs rose 3.4%.
Consumer Spending Slows Amid Rising Costs
September retail sales increased 0.8%, slowing from August's 1.3% advance. The spending slowdown raises questions about consumer purchasing power as businesses face higher input costs. The producer price index feeds into calculations of the Federal Reserve's preferred inflation measure, the personal consumption expenditures price index.
Fed Rate Expectations Remain Unchanged
Despite the inflation readings, prediction market traders on Polymarket assigned a 72% probability to the Federal Reserve leaving interest rates unchanged at its October 27-28 meeting, with 28% odds assigned to a quarter-point rate increase. The market had attracted nearly $41.5 million in trading volume as of October 15.
The Fed raised its benchmark rate to 3.75% to 4% in September, making the upcoming meeting particularly consequential.
