US wholesale inflation rises 6.3% in September as fuel costs surge

Wholesale inflation accelerated significantly in September as rising fuel costs pushed up prices across the economy. The Labor Department’s producer price index, which measures inflation before it reaches consumers, rose 6.3% from a year ago, up from 5.6% in August. This marks the biggest increase since December 2022, according to government data released Thursday.

On a monthly basis, wholesale prices increased 1.3% from August to September, the largest monthly gain since March 2022. The previous month saw a 0.5% increase. The data indicates that higher fuel prices, particularly for diesel used in transportation, are driving up the cost of shipping and warehousing goods.

Impact on Transportation and Food

Transportation and warehousing prices climbed 3.4% in September and are 16% higher than a year ago. Carl Weinberg, chief economist at High Frequency Economics, noted the broader implications of these costs. "The jolt to transportation prices affects every good in the economy, since inputs to manufacturing move to factories and goods at all stages of production move from producer to wholesaler to retailer by truck, train or rail," Weinberg wrote in a client note. "This is how increases in energy prices ‘bleed through’ to prices of core goods."

The rise in energy costs is also affecting food prices. Wholesale food prices jumped 1.2% from August to September, although they remain unchanged from a year ago. Farmers rely on diesel to power equipment, which could further push up food costs. According to AAA, diesel prices averaged $6.32 a gallon nationwide on Thursday, up from $3.66 a year ago.

Core Inflation and Federal Reserve Pressure

Excluding volatile food and energy categories, core prices rose 0.7% from August to September, a sharp increase from the 0.2% rise in the previous month. Compared with a year ago, core prices rose 5%, up from 4.6% in August. Wholesale gas prices soared more than 20% from August to September, driving most of the increase. Other costs, including electricity, vegetables, shipping, and air fares, also rose.

These figures amplify the consumer price index released Wednesday, which also accelerated in September. Both reports increase pressure on the Federal Reserve to raise its key interest rate. Inflation has remained above the central bank’s 2% target for five and a half years. The Federal Reserve is scheduled to hold a policy meeting in two weeks. While some economists expect the Fed to keep rates unchanged, others anticipate a hike following the recent inflation data. Officials have already penciled in at least one more rate hike this year.

Fed Chairman Kevin Warsh speaks at an international economic conference late Thursday in Bangkok, and his remarks will be closely watched for any hints of whether he supports a rate hike this month. The Fed uses higher rates to slow borrowing and spending in an effort to lower inflation, a strategy that has not proved as effective as hoped this year.

Economic and Political Implications

Ongoing inflation has eroded Americans’ incomes. The Labor Department reported Wednesday that average weekly paychecks, when adjusted for inflation, shrank compared with the same month last year for the first time since May. Higher prices have also impacted political sentiment. A poll released this month by The Associated Press-NORC Center for Public Affairs Research found that just 17% of U.S. adults approve of President Trump’s handling of the cost of living. Only 26% approve of his handling of the economy overall, a new low.

Why it matters

The sharp rise in wholesale inflation signals that price pressures are spreading beyond energy to other sectors, including food and transportation. This complicates the Federal Reserve’s efforts to bring inflation down to its 2% target and may lead to further interest rate hikes, which could slow economic growth. The erosion of real wages and declining consumer confidence also pose challenges for policymakers ahead of the midterm elections.

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Sources

• apnews.com: Soaring energy prices send inflation upward rapidly at the wholesale level | AP News
• abcnews.com: Wholesale inflation jumped last month by most in four years as gas prices soared - ABC News
• economictimes.indiatimes.com: US Wholesale inflation jumped last month by most in four years as gas prices soared - The Economic Times
• pressdemocrat.com: Wholesale inflation jumped last month by most in four years
• ottumwacourier.com: Wholesale inflation jumped last month by most in four years as gas prices soared | Business | ottumwacourier.com
• mendocinobeacon.com: Wholesale inflation jumped last month by most in four years

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.