The Producer Price Index rose 6.5% annually in October, the biggest increase since November 2022, driven by energy and food costs.
Wholesale inflation in the United States accelerated in October to its highest annual rate in nearly four years, according to Bureau of Labor Statistics data released Friday.
The Producer Price Index, which measures average price changes received by producers and manufacturers, rose 0.3% from the previous month and 6.5% for the 12 months ended in October. That is the highest annual rate since November 2022.
High energy prices continued to ripple through US supply chains. The Iran war and the resulting energy supply shock have sent gas and diesel prices markedly higher in recent months. Fuel prices did not rise as quickly in October as they did in September, when PPI rose at a rate of 1.4% to reach 6.3%, but the surge over past months kept wholesale inflation elevated.
Food prices climbed for the second consecutive month, rising 1.3% in October, the fastest monthly hike since July 2022, after increasing 1.1% in September. Within food, produce products saw the largest spikes. Wholesale fresh and dry vegetables jumped 26.7% in October, following a 30.7% leap in September. Freight transportation costs for the trucking industry are up nearly 25% from last year, BLS data shows.
Excluding gas and food prices, core PPI rose 0.3% on a monthly basis and 5% annually, matching a rate last seen in January 2023.
The massive investment in artificial intelligence technology and equipment is contributing another layer of inflationary pressures for businesses and consumers, according to CNN. Electronic components and accessories rose at a six-month high pace of 4.2% and are up 31.7% from the year before, the highest annual rate on record, according to BLS data that goes back to December 1966.
Friday’s PPI data, coupled with the hotter-than-expected October CPI released earlier this week, are expected to result in a rate hike from the Federal Reserve when policymakers meet in early December. Markets are expecting a quarter-point hike, though Fed Governor Christopher Waller indicated earlier this week that a half-point hike could be necessary.
The rate hikes might not end with December, said Ben Ayers, Nationwide senior economist. "Lingering impacts from the spike in fuel prices could linger into 2027, warranting further tightening by the Fed to limit second and third order inflation impacts," he wrote in a note Friday.
Wholesale inflation does not translate directly to the Consumer Price Index, but its trajectory and category-specific price hikes can serve as a potential bellwether for what consumers could experience in the months to come. Higher transportation and input costs businesses are seeing now might not hit consumers for another six to eight months, said Matt Bush, US economist at Guggenheim Investments. Annual business price resets early next year could bring further sticker shock for consumers.
Sources
This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.
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