Wholesale inflation rose more than expected in September, driven by a significant increase in fuel costs, according to the Labor Department. The producer price index, which measures inflation before it reaches consumers, increased by 6.3% compared to the previous year, up from 5.6% in August, marking the largest rise since December 2022. On a monthly basis, wholesale prices rose by 1.3% from August to September, the largest increase since March 2022, following a 0.5% gain the prior month.
The rise in wholesale prices is attributed to increasing fuel prices, particularly diesel, which is essential for long-haul trucking and freight transport. This increase is contributing to higher shipping and warehousing costs. Wholesale food prices also rose by 1.2% from August to September, although they remain unchanged from a year ago. Additionally, transportation and warehousing prices increased by 3.4% last month and are 16% higher than a year ago.
Carl Weinberg, chief economist at High Frequency Economics, noted that rising transportation prices impact the entire economy, as they affect the movement of goods at all production stages. Farmers, who rely on diesel for their equipment, may also face increased costs, with diesel prices averaging $6.32 per gallon nationwide, up from $3.66 a year ago.
The report follows a consumer price index released earlier, which also indicated rising inflation due to increased gas prices. Both reports may influence the Federal Reserve's decisions regarding interest rates, as inflation has remained above the central bank's target of 2% for over five years. Core prices, excluding food and energy, rose by 0.7% from August to September, up from 0.2% the previous month, with a year-over-year increase of 5%, compared to 4.6% in August.
The increase in energy prices has been a significant factor in the overall inflation rise, with wholesale gas prices soaring over 20% from August to September. Other costs, including electricity, vegetables, shipping, and airfares, have also increased. The ongoing inflation has affected Americans' incomes, with average weekly paychecks adjusted for inflation shrinking for the first time since May.
A recent AP-NORC poll indicated that approximately 80% of registered voters disapprove of former President Trump's handling of the cost of living, while about 75% disapprove of his management of the economy. The Federal Reserve is scheduled to hold a policy meeting in two weeks, where it may decide to maintain its key short-term interest rate. However, following the recent inflation reports, some economists anticipate a potential rate hike, with officials considering at least one more increase this year. Fed Chairman Kevin Warsh's remarks at an economic conference in Bangkok will be closely monitored for insights into the Fed's stance on interest rates.
Despite a rate hike in September, retail sales in the U.S. rose faster than expected in the same month, largely due to increased spending at gas stations as consumers pay more to fill their vehicles.