Producer Inflation Rises More Than Expected In September As Food, Transportation Costs Jump

Price pressures on U.S. producers jumped unexpectedly in September, mirroring a similar trend observed in consumer inflation data reported a day earlier.

The Producer Price Index (PPI) rose more sharply than anticipated in September, and the August reading was upwardly revised. Core producer prices — excluding energy and food — also climbed more than forecasted.

Prior to the release of the PPI report, traders had assigned a nearly 85% chance of a 25-basis-point interest rate cut in November.

September Producer Price Index Report: Key Highlights

• Headline PPI for final demand rose by 1.8% year-over-year in September, down from an upwardly revised 1.9% in August. This outcome was slightly above economist expectations of 1.6%, as tracked by TradingEconomics.
• On a monthly basis, PPI flattened, decelerating from August’s reading and coming in below the forecasted 0.1% increase.
• Food costs soared by 1% month-over-month, recording the largest increase since February.
• A significant factor in the September rise in prices for final demand services was a 3% increase in the index for deposit services.
• Other contributing indexes included machinery and vehicle wholesaling, furniture retailing, software publishing for desktop and portable devices, apparel wholesaling, and airline passenger services, all of which saw gains
• Core PPI soared to 2.8% year-over-year in September, up from August’s 2.4% and slightly above market expectations of 2.7%.
• On a month-over-month basis, core PPI rose 0.2%, down from August’s 0.2% pace and matching forecasts.

PPI Metrics	September 2024	August 2024	Econ. consensus
Headline PPI (YoY)	1.8%	1.9% (upwardly revised from 1.7%)	1.6%
Headline PPI (MoM)	0.0%	0.2%	0.1%
Core PPI (YoY)	2.8%	2.4%	2.7%
Core PPI (MoM)	0.2%	0.3%	0.2%

Market Reactions

November interest rate cut expectations a marginal downward move after the release.

The U.S. dollar index (DXY), tracked by the Invesco DB USD Index Bullish Fund ETF UUP, as Treasury yields inched higher.

Notably, 30-year yields were up by 5 basis points to 4.41%, the highest since late July. As such, the iShares 20+ Year Treasury Bond ETF TLT was 0.7% lower during the premarket trading in New York, eyeing a 10-week low.

Futures on the S&P 500 were unchanged, while contracts on the tech-heavy Nasdaq 100 eased 0.2%. On Wednesday, , the SPDR S&P 500 ETF Trust SPY closed 0.2% lower.

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