Wholesale Inflation In September Rose Faster Than Expected: 8.5% Year-Over-Year

Wholesale inflation rose in September more than analysts expected, indicating that the Biden administration’s inflation is not going anywhere anytime soon.

The Department of Labor issued the Producer Price Index (PPI) report for last month on Wednesday morning, showing wholesale level prices went up by 0.4% over the previous month and 8.5% over September 2021. Economists had predicted 0.2% monthly and 8.3% annual increases.

The higher-than-expected PPI figures are a troubling sign for the Federal Reserve, as its previous interest rate hikes this year have not yet shown positive results. Many experts expect the Fed to raise interest rates two more times before the end of 2022.

The PPI was back up in September after falling by 1.1% in August. About 60% of last month’s increase is attributable to 1.2% increases in food staple costs. That includes a stunning jump of 15.7% in the last month in the wholesale cost of fresh and dried vegetables.

Even though gasoline costs fell by 2.0% in September, wholesale costs in the energy sector overall were up by 0.7%. The drop in gas prices (which has reversed since the beginning of October) was offset by cost increases for diesel fuel, natural gas, and home heating oil.

Wholesale costs in the services sector rose by 0.4%, marking the fifth straight month of increases in that index. The largest jump in that sector came in financial services at 0.6%.

LPL Financial chief economist Jeffrey Roach said the Wednesday PPI report lacks any “convincing evidence that inflation is cooling across the broad swath of the economy.” He said the numbers should lead to expectations that the Fed will “recommit to fighting inflation at the risk of pushing the economy into recession.”

While the Biden administration and much of the corporate media deny that the economy is already in recession, the nation has experienced two straight quarters of negative Gross Domestic Product (GDP) growth. The first report of 2022 third-quarter GDP is expected later this month.

Markets are bracing meanwhile for the September report for retail prices in the Consumer Price Index (CPI), set for release on Thursday morning. Experts are projecting a 0.3% bump in the CPI over the August figure.

Another worrying aspect of the worse-than-expected September PPI figure is the fact that economists consider the wholesale index to be a better indicator than CPI of future inflationary expectations, as increased production costs have lingering effects on many essential goods for many months into the future.