Inflation persists as Wholesale Prices Rise 0.4% in September

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The producer price index grew 0.4% in September, contrary to the Dow Jones forecast of a 0.2% increase.

Excluding food, energy, and trade services, the index increased 0.4% month on month and 5.6% year on year.

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

The producer price index, a measure of the prices that businesses in the United States receive for the goods and services they create, grew 0.4% for the month, compared to the Dow Jones forecast of a 0.2% increase. PPI grew 8.5% year on year, a small slowdown from the 8.7% increase in August.

Excluding food, energy, and trade services, the index rose 0.4% month on month and 5.6% year on year, mirroring the August gain.

With a 1.2% monthly increase, food prices aided the increase in goods inflation. After registering significant gains in the previous two months, energy climbed 0.7%.

Inflation has been the economy’s most serious problem in the last year, with the cost of living at its highest level in more than 40 years.

The Fed has responded by raising rates five times this year for a total of three percentage points, and a fourth consecutive 0.75 percentage point hike is generally predicted when it meets again in three weeks.

Inflationary momentum has built up in the US economy and will remain in the short term, with the Fed increasing rapidly,” said Bill Adams, Comerica Bank’s senior economist.

However, the numbers released on Wednesday demonstrate that the Fed still has work to do. Indeed, Cleveland Fed President Loretta Mester stated on Tuesday that “no progress on inflation has been made.” Following the announcement of the PPI, traders priced in an 81.3% possibility of a three-quarter point increase, the same as the day before.

Following the announcement, stock market futures pared gains, while Treasury rates were barely changed for the day.

The PPI is published one day before the more widely monitored consumer price index. PPI measures the prices obtained at the wholesale level, whereas CPI measures the prices paid by consumers.

According to the BLS, a 0.4% increase in services accounted for about two-thirds of the increase in PPI. A 6.4% rise in fees obtained for traveller accommodation services was a significant factor to that increase.

Final demand products prices up 0.4% month on month, propelled by a 15.7% increase in the index for fresh and dried vegetables.

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