US wholesale prices rose 6.3% year over year in September, the largest annual gain since 2022, as energy costs drove the index higher. A hot consumer price reading a day earlier also topped forecasts, and fed funds futures traders raised their bets on a rate hike.
The producer price index climbed 1.3% in September and 6.3% on an annual basis, according to the Bureau of Labor Statistics. That marked the largest monthly and annual gains since March 2022 and December 2022, respectively. The producer price index is a measure of underlying inflation pressures.
Economists polled by Dow Jones forecast an advance of 0.6% on the month and 5.5% annually, so both readings topped expectations.
Energy feeds into other categories
Energy drove a sizable chunk of the increases as the Middle East conflict curtailed oil supply and sent prices surging. The core PPI, which excludes food and energy, added 0.7% on the month and 5% over 12 months.
There are signs of spillover, too. The BLS said almost half of September's increase in processed goods for immediate demand was connected to the rise in diesel fuel prices.
Consumer prices and retail sales
Wednesday's consumer price index release showed a rise of 0.6% from August to September and 3.7% on a 12-month basis. Economists had forecast 0.6% and 3.6%. Core CPI added 0.3% on the month and 2.6% year over year, against forecasts of 0.2% and 2.5%.
Meanwhile, retail sales grew 0.8% in September, ahead of the 0.4% economists anticipated, but down from a gain of more than 1% a month earlier. Excluding autos and gas stations, sales rose 0.25%, a drop from around 1.1% in the prior period. CNBC reported that this slowdown offers a sign that high fuel prices are causing consumers to tighten the belt elsewhere.
Traders price in a possible Fed hike
The data left a growing minority of fed funds futures traders expecting a rate increase at the central bank's meeting later this month. According to CME's FedWatch tool, traders price a nearly 34% likelihood of a hike on Oct. 28, up from under 18% a week prior. About 90% expect at least one hike by the end of the year.
Chris Zaccarelli, investing chief at Northlight Asset Management, said: "it seems the Fed will have no choice but to raise rates again this year"
Source: CNBC
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