Inflation Hits Wholesale Prices Again in September

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Inflation has been stubbornly persistent in recent months, and it appears that the trend will continue in September as well. The Producer Price Index rose 0.4 percent in September on top of last month’s 0.5 percent, according to the Labor Department on Tuesday. Economists had expected an increase of only 0.1 percent for September after last month’s outsized gain was driven by rising energy costs. Instead, inflation rose across the board as apparel prices gained 0.3 percent and food prices increased 0.2 percent from August to September, even though both categories are down overall from a year earlier.

According to a study released on Wednesday by the Bureau of Labor Statistics, wholesale prices increased more than forecast in September despite attempts by the Federal Reserve to keep inflation under control.

The producer price index, which tracks the prices U.S. companies charge for the goods and services they create, rose 0.4% for the month as opposed to the 0.2% advance predicted by Dow Jones. PPI increased 8.5% over the last year, which was a modest slowdown from the 8.7% in August.

When food, energy, and trade services are excluded, the index rose 0.4% for the month and 5.6% from a year earlier, both of which are increases from August.

With a 1.2% monthly increase, food costs contributed to the rise in goods inflation. After achieving enormous gains the previous two months, energy increased by 0.7%.

As the cost of living is approaching its highest level in more than 40 years, inflation has been the economy’s largest problem over the past year.

The numbers from Wednesday, however, demonstrate that the Fed still has work to do. In fact, Loretta Mester, president of the Cleveland Fed, stated on Tuesday that “inflation has not progressed.” Following the announcement of the PPI, traders set a similar 81.3% likelihood of a three-quarter point increase.

Following the announcement, stock market futures pared gains, but Treasury rates hardly moved throughout the session.

The consumer price index, which is more carefully observed, is released the day after the PPI. PPI gauges prices received at the wholesale level, whereas CPI gauges prices paid by consumers. This is how the two vary.

According to the BLS, a 0.4% increase in services was responsible for around two-thirds of the PPI increase. A 6.4% increase in pricing for tourist lodging services was a significant factor in that rise.

Prices for final demand items increased 0.4% over the course of the month as well, driven by a 15.7% increase in the index for fresh and dried vegetables.

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