PPI Inflation Firms in September

Sam Bullard Wells Fargo

Reflecting solid gains in energy and food, the PPI for final demand increased a stronger-than-expected 0.3 percent in September. While still benign, producer prices have picked up over the past year.

Solid Food and Energy Prices Gains

Following back-to-back 0.4 percent declines in August and July, PPI for goods increased 0.7 percent last month. Over 60 percent of the gain can be attributed to energy, though wholesale food prices increased a solid 0.5 percent.
Services inflation maintained its steady course, edging up 0.1 percent for the second consecutive month as an increase in transportation/warehousing offset a decline in trade services.

Core Producer Price Inflation Strengthening

Our preferred measure of core PPI, which excludes food, energy and trade services, rose a stronger-than-expected 0.3 percent. September's performance pushed the year-over-year rate up to 1.5 percent, the fastest pace since November 2014.
Admittedly still tame, producer prices have picked up over the past year and support our outlook for stronger inflation pressures in the coming quarters.

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Author

Sam Bullard

Wells Fargo

Sam Bullard is a director and senior economist with Wells Fargo. Based in Charlotte, N.C., he covers U.S. macroeconomic and financial market developments as well as the financial services industry.

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