The Fed’s efforts to tame decades-high inflation took another hit Wednesday after the release of wholesale prices Wednesday showed a bigger-than-expected spike in September from the previous month.
The producer price index — which measures price changes before they reach the consumer — rose 0.4% in September from August after two months of declines, according to the Labor Department. The overheated reading was higher than the estimated 0.2% gain by economists.
The September monthly increase was pushed higher by a big surge in hotel room costs and home-heating prices. Food costs also jumped in September from August, with the cost of fresh and dry vegetables soaring nearly 16%.
“Price pressures remain elevated and volatile, particularly for food and gas, given the ongoing war in Ukraine and ongoing supply chain disruptions,” Matthew Martin, a U.S. economist at Oxford Economics, told the Wall Street Journal.
The slightly good news was the PPI’s 8.5% rise in September from the previous year was a shade better than the 8.7% annual increase in August – and 11.3% in June.
“Inflation is all about pass-through costs at the lower level of production, so this report counts as some relief for beleaguered consumers who face runaway inflation on the goods sitting on store shelves,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
“The Fed’s war on inflation hasn’t been won yet, but at least the costs of goods at the producer level have stopped rising at a rate that looked out of control earlier this year.”
Digging deeper into the data, core PPI – which excludes food, energy and supplier margins – also climbed by 0.4% from a month earlier, an acceleration from the 0.2% rise in August. Core PPI increased 5.6% in September compared with a year ago, matching the August annual increase.
Investors are now laser-focused on Thursday’s release of the Consumer Price Index (CPI) as they await the Fed’s November rate hike of either 50 or 75 basis points.
The Fed has increased its short-term interest rate by three percentage points since March in an effort to tackle the nation’s highest inflation since the early 1980s.
Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, NC, said some bulls are hoping that if inflation slows it will give the Fed reason to “slow down or pause.”
With Post wires