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- Caroline Mercer via Fast Company
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- Economy·5 min to read
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Wholesale Inflation Hits Highest Level Since 2022 as Diesel Costs Surge
ReWholesale Inflation Hits Highest Level Since 2022 as Diesel Costs Surge
The producer price index jumped 6.3% in September from a year earlier, driven by a spike in diesel and transportation costs that is beginning to push food prices higher and complicating the Federal Reserve's rate decisions.
Wholesale inflation accelerated last month at its fastest annual pace in nearly three years, as a sharp rise in diesel and other energy costs pushed up the expense of moving goods through the economy and began to lift food prices that had appeared to be cooling.
The Labor Department reported Thursday that its producer price index, which measures inflation before it reaches consumers, rose 6.3% in September from a year earlier. That was up from 5.6% in August and marked the largest increase since December 2022. On a monthly basis, wholesale prices climbed 1.3% from August to September, the biggest one-month gain since March 2022, following a 0.5% rise the previous month.
Fuel costs drove much of the increase, with wholesale gasoline prices soaring more than 20% between August and September. Diesel, the fuel that powers long-haul trucks, freight trains, and most farm equipment, averaged $6.32 a gallon nationwide on Thursday, according to AAA, up from $3.66 a year earlier. Those higher fuel bills are rippling through the transportation and warehousing sector, where prices jumped 3.4% last month and stand 16% above year-ago levels.
The knock-on effects are beginning to show up in food prices. Wholesale food prices rose 1.2% from August to September, even though they remain unchanged from a year ago. Farmers rely on diesel to run most of their machinery, adding another layer of cost pressure to agricultural production.
«The jolt to transportation prices affects every good in the economy, since inputs to manufacturing move to factories and goods at all stages of production move from producer to wholesaler to retailer by truck, train or rail,» Carl Weinberg, chief economist at High Frequency Economics, wrote in a note to clients. «This is how increases in energy prices ‘bleed through’ to prices of core goods.»
The report amplifies the consumer price index released Wednesday, which also showed acceleration in September as gas prices jumped. But the new data indicated that a broad range of goods and services became more expensive, including electricity, vegetables, shipping, and air fares. Core prices, which exclude the volatile food and energy categories, rose 0.7% from August to September, up sharply from 0.2% the previous month. Compared with a year ago, core prices rose 5%, up from 4.6% in August.
The back-to-back inflation reports raise pressure on the Federal Reserve to increase its key interest rate when policymakers meet in two weeks. Inflation has now remained above the central bank’s 2% target for five and a half years. After two hot inflation readings this week, some economists expect the Fed could hike rates, even though officials had penciled in at least one more increase this year. Fed Chairman Kevin Warsh is scheduled to speak late Thursday at an international economic conference in Bangkok, and his remarks will be watched closely for any signal about whether he supports a rate increase this month.
The Fed uses higher rates to slow borrowing and spending in an effort to bring down inflation, but that approach has not proved as effective as hoped this year. After a rate hike in September, the government reported Thursday that retail sales rose faster than expected during the same month. A significant portion of that spending, however, occurred at gas stations, where Americans are paying more to fill their tanks.
Ongoing inflation has eroded household incomes and left many consumers sour on the economy. The Labor Department said Wednesday that for the first time since May, average weekly paychecks adjusted for inflation shrank compared with the same month a year earlier. The political fallout is also intensifying. A poll released this month by The Associated Press-NORC Center for Public Affairs Research found that just 17% of U.S. adults approve of President Trump’s handling of the cost of living, while only 26% approve of his handling of the economy overall, a new low.
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