October 12, 2022

• PPI for final demand rose 0.4% in September, estimate was 0.2%
  

• Advance driven by services, food and energy, core PPI up 0.3%
  

 

Prices paid to US producers increased more than was anticipated in September, indicating that inflationary pressures will persist for some time to come, keeping the Federal Reserve on its aggressive course of interest rate hikes.

 

According to Labor Department data released on Wednesday, the producer price index for final demand up 0.4% from August, marking the first gain in three months, up 8.5% from a year ago.

 

Core PPI, which excludes the volatile food and energy components, climbed 0.3% in September and increased 7.2% from a year earlier.

 

 

A further significant increase in the government’s consumer price index is anticipated on Thursday, highlighting the ongoing rapid and widespread inflation that would likely prompt Federal Reserve policy makers to raise their benchmark interest rates by another 75 basis points the following month.

 

Even though many businesses have been successful in passing on the increases in input and labour expenses, it’s uncertain how long they will be able to do so when customers start to object to increased prices.

 

Wednesday’s report showed that goods prices climbed by 0.4% as a result of rising energy and food prices. The survey highlighted increased prices for basic needs like residential natural gas, heating oil, and a wide variety of foodstuffs for Americans already dealing with severe inflation.

Food costs increased by 1.2%. Excluding food and energy, the index of goods costs was unchanged, the lowest reading since a fall in May 2020.

 

Services prices rose by 0.4%, the most in three months. However, some categories did show moderation in price pressures. The weakest improvement since April, wholesaler and retailer margins increased just 0.1%. For a third month in a row, warehouse and transportation costs decreased.

 

The price of commodities continue to be impacted by ongoing geopolitical developments. Wheat shipments are again being disrupted by the Russia-Ukraine conflict.

Meanwhile, the fate of contract discussions for 22,000 dockworkers on the West Coast remains uncertain, and a move by the OPEC+ coalition to reduce oil supply suggests volatility in oil markets in the near term.

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