Producer prices rose 1.3% in September, the Labor Department reported Thursday — the largest monthly increase since March 2022, more than double the 0.5% economists had forecast, and 6.3% higher than a year earlier, the biggest annual rise since December 2022. August was revised to a 0.5% gain.
The engine of the jump was goods, which surged 2.6% — the largest increase since the series began in December 2009. Energy prices climbed 10.8%, gasoline jumped 20.3%, and diesel rose 21% in a single month and 115.2% over the year. Wholesale food prices rose 1.2%, with fresh vegetables up 41.0% and eggs down 31.9%. Services rose 0.8%, trade margins 1.4%, road freight 3.8%, airfares 5.0%, and hotel rates 5.6%, while core producer prices excluding food and energy rose 0.7% on the month.
"Paychecks may not be keeping up with inflation, but at least people are still getting them." — Heather Long, Navy Federal Credit Union
The same week's other numbers explain why Americans are absorbing the shock: retail sales rose 0.8% in September, nearly triple the 0.3% forecast, with gas-station receipts up 6.4%, and jobless claims came in at 199,000 — near a 57-year low — with third-quarter growth tracking around 3.0%. Fifth Third's Chris Osmond noted the spending is being carried by a labor market that is simply not breaking.
The price pressure traces back to fuel. Retail gasoline is up 44% and diesel 59% since late February, through the Iran war's supply shock. The administration's response has been to attack the supply side: President Trump signed an executive order on October 5 in Nebraska making diesel tax-exempt, has said oil prices likely will not fall until after the November 3 midterms, and Treasury Secretary Scott Bessent used the IMF and World Bank meetings in Bangkok on October 15 to demand the World Bank end its ban on financing upstream oil and gas projects: "The Bank cannot credibly invoke country ownership while categorically excluding upstream projects before their development merits are even assessed."
For the Federal Reserve, the report lands awkwardly: economists estimate core PCE inflation — the Fed's preferred gauge — rose between 0.31% and 0.36% in September, September consumer inflation ran at 3.7%, and markets now put roughly 30% odds on another rate hike at the Fed's October 27–28 meeting, after it raised rates 25 basis points in September to a 3.75%–4.00% range.
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