September PPI 6.3% marks biggest jump since 2022

Wholesale inflation accelerated sharply last month, with the September PPI 6.3% annual rise in final demand prices the largest since December 2022, the Bureau of Labor Statistics said on Thursday. On a monthly basis the index jumped 1.3%, its biggest advance since March 2022, as gasoline and diesel prices spiked. The print adds a pipeline signal to the inflation debate just as markets weigh how the Federal Reserve responds.

What happened

The BLS release showed final demand goods prices up 2.6% in September, the largest increase since the series began in December 2009, with energy up 10.8%. Gasoline alone jumped 20.3% and accounted for half of the goods increase, while egg prices fell 39.7%. Services rose 0.8%, the most since April, with nearly half of that gain coming from a 1.4% rise in trade margins.

The core gauge that strips out food, energy and trade services rose 0.5% on the month and 5.0% from a year earlier. Cointelegraph said forecasters had expected the headline annual rate at 5.3% and core at 4.4%, making this a full percentage-point miss on the headline. Economist Mohamed El-Erian called the producer data even more striking than the consumer price report released a day earlier.

Further up the supply chain the pressure was heavier. Prices for unprocessed goods for intermediate demand rose 8.4% in September, with crude petroleum up 28.3%. Processed goods for intermediate demand climbed 14.1% over 12 months, the largest annual increase since August 2022.

Why it matters

Producer prices often feed into consumer prices with a lag, so the September PPI 6.3% reading strengthens the case that goods inflation has not yet peaked. The energy share is the key caveat: more than 80% of the goods increase came from energy, which can reverse quickly if supply fears ease. The core reading at 5.0% is harder to dismiss, because it excludes the most volatile categories.

Markets reacted unevenly. Bitcoin briefly slid below $80,000 after the release, yet Cointelegraph noted that the 10-year Treasury yield fell almost 3% on the day to its lowest level since Sept. 23. Former Goldman Sachs strategist Robin Brooks has argued that long-dated yields have decoupled from data surprises as deficit worries dominate.

For crypto, the mix is awkward. Hotter inflation keeps a tighter Fed in play, while lower long yields offer some relief to risk assets, which helps explain why CoinDesk found bitcoin's dip lasted only about two hours.

The bond market partly reversed on Friday. The 10-year Treasury yield rose one basis point to 5.07% in Asian hours as investors handed back some of Thursday's flight to safety, CoinDesk reported. That keeps long-term borrowing costs elevated going into the Fed chair's remarks.

What's next

The next PPI report, covering October, is scheduled for Nov. 13 at 8:30 a.m. Eastern time, according to the BLS. Before then, Fed Chair Kevin Warsh is due to speak at the IMF and World Bank meetings in Bangkok on Friday, and traders will parse his remarks for any reaction to back-to-back inflation surprises.

For the consumer side of the picture, see our coverage of the September CPI report, which also showed gasoline driving the headline. Our earlier piece on Treasury yields hitting multi-decade highs explains why the long end has become a deficit story as much as an inflation story.

If the September PPI 6.3% reading proves to be the peak, energy will have done most of the work. If core keeps climbing, the debate over another rate increase will only get louder.