Wholesale inflation surged in September, keeping affordability in focus ahead of the midterms
By Alicia Wallace, CNN
(CNN) — US wholesale inflation jumped in September to its highest level in more than four years, marking the second hotter-than-expected inflation reading this week and adding to concerns about the economy just weeks before the midterm elections.
The Producer Price Index rose 1.3% from the month before and 6.3% from the year before, according to Bureau of Labor Statistics data released Thursday morning. It’s a sharp upswing from August when wholesale prices rose 0.5% to an annual rate of 5.6%.
The latest PPI landed a day after the September Consumer Price Index report showed inflationary pressures were broadening.
The reports of accelerating price hikes come just weeks before the midterms, where affordability – or lack thereof – is expected to factor in heavily for US voters.
Economists had expected September PPI to increase 0.5% from August and 5.3% annually, according to FactSet. Instead, September marked the fastest monthly increase since March 2022 and the highest annual rate since December 2022, the year when US inflation hit a 40-year high.
Energy prices, driven higher by geopolitical conflicts including the war with Iran, drove September’s increase, accounting for 80% of the 2.9% leap in goods prices. That’s the largest-ever monthly increase, according to BLS data that goes back to 2009.
However, businesses are contending with price pressures beyond energy. Core PPI, which strips out food and energy, rose at 0.7%, its fastest rate in five months, lifting the annual rate to 5%, its highest since January 2023.
PPI, which measures the average change in prices received by producers of goods and services, serves as a potential bellwether for what consumers could experience in the months to come. Some of the PPI data also feeds into the Personal Consumption Expenditures price index, which is what the Federal Reserve uses for its 2% target rate.
Gas purchases pump up retail sales
A separate report from the Commerce Department Thursday showed that Americans slowed their spending in September.
US retail sales slowed to 0.8% last month after posting a surprisingly strong 1.3% gain in August, according to the latest monthly report from the Commerce Department. However, when excluding purchases at gas stations, retail sales rose just 0.2%.
Retail sales data is adjusted for seasonality but not inflation: When factoring in the pace of monthly price hikes (which rose at an unpalatable 0.6% in September), last month’s retail sales fell even flatter.
“Higher gas prices are beginning to bite because, unlike earlier in the year, there’s no offset this time around from fiscal policy,” Michael Pearce, chief US economist at Oxford Economics, wrote in a note to investors Thursday. “We estimate the cumulative additional spend on gasoline so far this year now outweighs the rise in tax refunds from a year ago.”
On an annual basis, retail sales were up 6.3% (4.5%, excluding gas station spending). However, on a three-month annualized basis, that growth rate is running at 2.4%, signaling a loss of momentum heading into the holiday shopping season, noted Gary Schlossberg, global strategist at Wells Fargo Investment Institute.
This is a developing story and will be updated.
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