Wholesale inflation jumped in September, keeping affordability in focus ahead of midterm elections

U.S. wholesale inflation jumped in September to its highest level in more than four years, marking the second higher-than-expected inflation reading this week and deepening concerns about the economy just weeks before the midterm elections.

The producer price index rose 1.3% from the previous month and 6.3% from a year earlier, according to Bureau of Labor Statistics data released Thursday morning. This is a sharp increase from August, when wholesale prices rose 0.5% to an annual rate of 5.6%.

The latest PPI came a day after the September Consumer Price Index report showed inflationary pressures widening.

Reports of accelerating price increases come just weeks before the midterm elections, where affordability – or lack thereof – is expected to play an important role for American voters.

Economists expected the September PPI to rise 0.5% from August and 5.3% annually, according to FactSet. Instead, September marked the fastest monthly increase since March 2022 and the highest annual rate since December 2022, when U.S. inflation reached its highest level in 40 years.

Energy prices, driven up by geopolitical conflicts, notably the war with Iran, were behind September’s rise, accounting for 80% of the 2.9% rise in goods prices. This is the largest monthly increase on record, according to BLS data dating back to 2009.

However, companies face pricing pressures beyond energy. The core PPI, which excludes food and energy, rose 0.7%, its fastest rate in five months, bringing the annual rate to 5%, its highest since January 2023.

The PPI, which measures the average change in prices received by producers of goods and services, serves as a potential indicator of what consumers might experience in the coming months. Some PPI data also populates the personal consumption expenditures price index, which the Federal Reserve uses for its 2% target rate.

A separate report from the Commerce Department showed Thursday that Americans reduced their spending in September.

U.S. retail sales slowed to 0.8% last month after posting a surprisingly strong 1.3% gain in August, according to the Commerce Department’s latest monthly report.

Retail sales data are seasonally adjusted but not inflation adjusted: if you take into account the pace of monthly price increases (which rose at an unpleasant 0.6% in September), retail sales fell even more flatly.

Stock futures were mixed Thursday morning after the economic data release: Dow futures held on to slight gains of 0.3%, while S&P 500 and Nasdaq 100 futures held on to losses of 0.3% and 1.2%, respectively.

This is a developing story and will be updated.