US producer prices rose in September at the fastest pace in more than four years, as a record surge in energy costs reverberated through the economy. The producer price index advanced 1.3% from August — the most since March 2022 — and 6.3% from a year earlier, the Bureau of Labor Statistics said Thursday, far exceeding economists’ expectations.
Economists had forecast gains of about 0.6% on the month and 5.5% over the year, making the hot reading a sharp upside surprise. It was the fastest monthly increase since March 2022 and the highest annual rate since December 2022, underscoring how energy-driven inflation is broadening. The acceleration also marks the biggest year-on-year jump in producer prices since December 2022, according to the department.
Coming a day after hotter-than-expected consumer inflation of 3.7%, the data add to the challenge facing President Donald Trump as he tries to cool prices and win over cost-weary voters in November’s midterm elections. While the figures may not lock in a second consecutive interest rate hike this month, the odds of further tightening to tame inflation have climbed.
Producer prices: energy drives the record surge
Energy was the primary driver of the September jump in producer prices. Final demand goods prices climbed 2.65% on the month, the largest increase since the BLS began tracking the series in December 2009, with energy accounting for more than 80% of that gain as its sub-index soared 10.8% — the most on record.
Wholesale gasoline prices surged 20.3% in September, alone accounting for about half of the total rise in final demand goods, the report said. The indexes for diesel fuel, jet fuel, residential electric power and crude petroleum also rose, reflecting the squeeze on global oil supply from the war with Iran. Final demand food prices rose 1.2% over the month, while goods excluding food and energy edged up just 0.3%.
Services also firmed. The services index rose 0.8% on the month, the most since April, led by a 3.4% jump in transportation and warehousing — up 16% year over year — while wholesale trade margins for machinery and vehicles added to the pressure. A core measure stripping out food, energy and trade services still rose 0.5% on the month and 5.0% over the year, a sign that producer prices are running hot well beyond fuel alone.
Further up the pipeline, the picture was even hotter: unprocessed goods for intermediate demand jumped 8.4%, the most since February 2022, and are up 21.5% from a year ago — suggesting more cost pressure is still working its way toward consumers.
Energy analysts caution that fuel prices remain hostage to geopolitics. Any escalation in the conflict with Iran could send oil higher again, while a resolution would likely bring swift relief — leaving the inflation outlook unusually binary in the months ahead.
The report also showed wholesale trade margins firming and transportation costs climbing at their fastest pace since April — pressures that tend to filter into consumer prices with a lag. With producer prices running this hot, the White House faces growing pressure to show progress on the cost of living before the midterms.
Producer prices put pressure on the Fed
“With a second straight day of higher-than-expected inflation numbers, it seems the Fed will have no choice but to raise rates again this year,” said Chris Zaccarelli, chief investment officer of Northlight Asset Management. The odds of further tightening have climbed since the data landed, with traders now split on whether the next hike comes in October or December.
The hot producer prices data deepen the dilemma for Fed Chair Kevin Warsh, who has declined to signal the central bank’s next move. Stephanie Roth, chief economist at Wolfe Research, told Bloomberg the numbers show energy costs reverberating through the US economy at a pace not seen since 2022.
For households, the message is sobering: the same fuel costs lifting producer prices are already showing up at the pump and in utility bills. Until energy markets calm, economists say, relief on either wholesale or retail inflation is unlikely to arrive.