WASHINGTON — U.S. wholesale prices surged in September at their fastest pace in years, driven higher by skyrocketing fuel costs linked to conflict in the Middle East, according to Labor Department data published Thursday.
The producer price index, which tracks cost changes before goods and services reach consumers, climbed 1.3 percent from August to September, the Bureau of Labor Statistics reported. On an annual basis, wholesale inflation reached 6.3 percent, up from 5.6 percent recorded in August. Both measures marked the steepest increases since 2022 and exceeded expectations from economists polled by Dow Jones, who had projected a 0.6 percent monthly uptick and a 5.5 percent yearly gain.
Energy spikes drive broad wholesale pressures
Surging fuel expenses accounted for the bulk of the monthly acceleration. Wholesale gasoline costs jumped more than 20 percent from August, influenced by supply disruptions tied to the U.S. war with Iran, CNBC reported. Government data indicated that higher energy prices made up 80 percent of the 2.9 percent surge in overall goods, while nearly half of the increase in intermediate processed goods stemmed directly from diesel fuel, according to CNN.
Inflationary pressures also expanded across areas outside of the energy sector. Core producer prices, which omit volatile food and fuel categories, increased 0.7 percent in September and 5 percent from the same period a year earlier. Costs also climbed for electricity, shipping, car repairs, and airline tickets, according to network reports.
The wholesale figures landed one day after the consumer price index showed a 0.6 percent monthly gain and a 3.7 percent annual rate, which also topped forecasts. Combined, the twin reports signaled that broader business expenses continue to ripple through the wider economy.
Household budgets and spending strain
Persistent price hikes have continued to diminish household purchasing power. Adjusted for inflation, average weekly earnings fell last month compared to a year ago, marking the first year-over-year decline since May, ABC News reported. Meanwhile, wage growth of 3 percent lagged behind the 3.7 percent consumer inflation pace, according to figures cited on PBS News.
The financial pressure is prompting Americans to modify their spending habits. A separate Commerce Department report released Thursday showed retail sales rose 0.8 percent in September, down from a 1.3 percent gain in August. Excluding service stations and automobile dealerships, sales advanced by only 0.25 percent, indicating that higher fuel expenses are compelling shoppers to trim budgets in other categories.
“With a second day in a row 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 at Northlight Asset Management, in comments reported by CNBC.
The economic headwinds also pose mounting political challenges for Republicans just three weeks ahead of the midterm elections. An Associated Press-NORC Center for Public Affairs Research poll released this month found that only 17 percent of U.S. adults approve of President Donald Trump’s handling of living costs, while his overall economic approval rating dropped to 26 percent.
Fed policy path and outlook
The persistent inflation readings have heightened focus on the Federal Reserve, where policymakers have struggled to bring inflation down to their 2 percent target for more than five years. The central bank’s policy committee is scheduled to convene in two weeks. While most economists expect benchmark borrowing costs to remain steady at the upcoming meeting, CME FedWatch data indicated that traders now assign an approximate 34 percent chance to a rate increase on Oct. 28, up from less than 18 percent last week.
Roughly 90 percent of futures traders project at least one interest rate increase before the conclusion of the year, likely during the Fed’s December meeting, according to CNBC.
What remains uncertain is whether oil supply disruptions will continue pushing wholesale costs higher into late autumn, and how severely consumer cutbacks might affect holiday retail performance in the closing months of the year.
