The pipeline of U.S. inflation widened abruptly last month. Prices received by domestic producers for final demand climbed 1.3 percent in September after seasonal adjustment, the Bureau of Labor Statistics said Thursday, a monthly gain unmatched since March 2022. Over the 12 months ended in September, the unadjusted index climbed 6.3 percent, the steepest annual gain since December 2022. Economists polled by WSJ had expected a far smaller monthly rise.
Energy did most of the damage. Prices for final demand goods advanced 2.6 percent, the biggest increase since the series began in December 2009, with most of that rise traced to a 10.8 percent jump in energy, the agency said. Gasoline alone climbed 20.3 percent, while diesel, jet fuel and crude petroleum also rose. News reports tied the surge to the continuing U.S.-Israeli war with Iran, which has kept oil prices elevated. Not everything went up: egg prices fell sharply, and fuel retailers' margins collapsed as station owners absorbed part of the increase.
The pressure was not confined to fuel. Services prices posted their largest rise since April, led by wider trade margins and higher freight and airline costs, the report said. Stripping out foods, energy and trade services, the index still rose 0.5 percent on the month and 5.0 percent over the year, and prices for unprocessed goods bound for intermediate demand jumped 8.4 percent.
The reading lands at a delicate moment for policymakers. The Federal Reserve raised its benchmark rate in September after back-to-back hot inflation reports, and some economists now expect another increase at the central bank's meeting later this month, though futures markets still lean toward December. Hotel rates and airfares, which feed directly into the Fed's preferred inflation gauge, were among the services that rose. The October producer price report is scheduled for November 13, the agency said.