President Donald Trump suffered a second inflation setback in as many days on Thursday after a closely watched key economic indicator recorded its largest monthly increase in more than four years.
The Producer Price Index—what producers collect for making goods and services—rose 1.3 percent in September, accelerating from 0.5 percent in August and 0.2 percent in July, the Bureau of Labor Statistics said. It was the largest monthly increase since March 2022. Producer prices were also 6.3 percent higher than a year earlier, the fastest annual increase since December 2022.
The report followed Wednesday's Consumer Price Index, which showed prices paid by consumers increasing 0.6 percent during September and 3.7 percent from a year earlier.
Taken together, experts said the reports show that inflationary pressure is reaching businesses and households. That could create a difficult political message for Trump and congressional Republicans less than three weeks before the November 3 midterm elections.
“These two reports together are a warning that inflation is still working its way through the economy,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek. “Consumers are already feeling it. And businesses are facing cost pressures that could mean more price increases ahead.”
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Why It Matters
The economy and cost of living are dominating voters' concerns ahead of the midterms.
A Pew Research Center survey conducted September 28-October 4 found that 84 percent of registered voters considered the economy very important to their vote, making it the leading issue among supporters of both major parties.
An AP-NORC survey released on Thursday similarly found that 85 percent of voters viewed the economy as one of the election's most important issues, while 84 percent said the same about the cost of living. The poll also found that 36 percent approved of Trump's overall job performance and 64 percent disapproved.
The latest Fox News poll found that six in 10 registered voters considered the cost of living the country's most important economic issue. Seventy-four percent rated the economy negatively, 55 percent said inflation was "not at all" under control and only 22 percent approved of Trump's handling of inflation.
What to Know
When Trump's second term began in January 2025, annual consumer inflation stood at 3 percent. It reached 3.7 percent in September of this year.
However, the CPI and PPI measure different parts of the economy.
The CPI tracks the average change in prices paid by urban consumers for a basket of goods and services, while the PPI measures changes in the prices domestic producers receive for their output, including goods and services sold before they reach consumers.
“The jump in wholesale prices is a massive problem for many Americans, as it only adds pricing pressure to already-high costs,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek. “As diesel costs rise dramatically, those transportation costs get passed on [to] the consumer, and the result in Americans are paying more for everyday items.”
In simple terms, CPI shows what households are already paying, while PPI can provide an earlier indication of cost pressure building among manufacturers, wholesalers and other businesses.
Businesses do not automatically pass every cost increase on to customers. They may absorb some of the additional expense through lower profit margins or negotiate with their supplies. However, sustained increases in fuel, transportation, materials and wholesale costs can eventually appear in consumer prices.
The September increase was heavily influenced by energy, but it was not limited to that category.
Prices for final-demand goods (those sold to their ultimate user, like the consumer) jumped 2.6 percent, the largest increase since the series began in December 2009. More than 80 percent of that rise came from energy prices, which increased 10.8 percent. Meanwhile final-demand food prices rose 1.2 percent, while goods excluding food and energy increased 0.3 percent.
The report's measure excluding food, energy and trade services rose 0.5 percent in September and 5 percent year-over-year, which indicates that the jump was not solely defined by energy, as costs in that sector have jumped since the start of the war with Iran on February 28.
What Do CPI and PPI Together Imply?
The reports show that inflation is affecting consumers now while higher costs continue to move through production and distribution networks.
Wednesday's CPI release found that energy prices rose 5.2 percent in September and were 20.4 percent higher than a year earlier. Gasoline prices increased 9.1 percent for the month and accounted for more than half of the headline CPI increase.
The PPI then showed even greater pressure earlier in the supply chain. Producer energy prices jumped 10.8 percent during September, gasoline increased 20.3 percent, and diesel fuel, jet fuel, residential electricity and crude oil also rose.
“This report is saying what many economists suggested would happen once the tariff regime began,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek. “Although gasoline accounted for approximately half of the increase in goods prices, other parts of the economy, such as services and warehousing, are also seeing price increases that exceeded expectations.”
Food presents another warning sign. Consumer food prices were flat during September, but producer food prices increased 1.2 percent. Fresh and dry vegetables were among the categories recording producer-level increases.
“CPI did not show a significant jump in food prices, but the PPI is telling another story," Thompson said. "At the consumer level, food prices are relatively stable, but at the producer level, prices are accelerating. This could lead to higher costs moving through the supply chain and eventually being passed along to the end consumer.”
Experts say that PPI is not a direct forecast of CPI, and a 1.3 percent monthly rise in producer prices does not mean consumer prices will increase by the same amount. The reports nevertheless indicate that the pressures affecting household budgets have not yet fully disappeared upstream.
When Could Prices Rise?
The timing of when and how producers’ high costs affect consumers depends on the businesses' specific contracts and inventories.
Fuel prices can reach consumers quickly at gas stations and through airline tickets, but higher freight and material expenses may filter through more gradually as businesses replenish inventories and renegotiate supply agreements.
The strongest immediate risks appear to be in sectors closely tied to energy and transportation.
Processed energy goods used by businesses increased 10.2 percent in September. Unprocessed energy materials rose 22.2 percent, including a 28.3 percent jump in crude petroleum. Diesel fuel prices rose 21 percent at the processed intermediate-demand level.
“Gas prices can change almost immediately,” Ryan said. “Groceries, deliveries and other goods could become more expensive over the coming weeks or months if those higher costs stick around. Energy drove much of September's increase, but the underlying producer inflation numbers suggest the pressure goes beyond gasoline.”
Higher inflation could also affect consumers indirectly by complicating the Federal Reserve's interest-rate decisions. Following Wednesday's CPI release, traders increased expectations that the central bank could raise interest rates again. That would keep borrowing costs elevated for mortgages, credit cards and auto loans.
“The political problem for Trump is pretty straightforward,” Ryan said. “He promised Americans lower prices. Instead, they're seeing inflation accelerate just weeks before the midterms.”
What Sectors Will Be Hit Hardest?
Gasoline and diesel
Gasoline was the largest driver in both reports. Consumer gasoline prices rose 9.1 percent in September, while producer gasoline prices surged 20.3 percent. Diesel fuel also rose sharply at the producer and intermediate-demand levels.
Transportation and delivery
Producer prices for transportation and warehousing services increased 3.4 percent.
These increases could affect retailers and other businesses that rely heavily on delivery networks, but it’s not yet clear how much of the cost will ultimately be passed on to consumers.
Groceries and restaurants
Producer food prices rose 1.2 percent even as consumer food prices were unchanged for the month. Fresh and dry vegetables and food and alcohol wholesaling were among the areas recording increases. Food retailing margins also rose.
That does not guarantee an immediate rise in grocery prices, but retailers and food businesses could face stronger cost pressure in the months ahead.
“Trump campaigned on lowering prices and taming inflation, but the economy is seeing quite the opposite at this time,” Thompson said. “Many of his policies, particularly tariffs, have been inflationary in nature. History has shown us the economic consequences of protectionist policies.…The political problem is that consumers were promised lower prices, yet many are continuing to experience higher costs across the economy.”
Electricity and travel
Residential electricity, jet fuel, airline passenger services and traveler accommodations all registered producer-price increases. The consumer report also showed airline fares and household energy costs under pressure.
One notable exception was eggs: Producer prices for chicken eggs plunged 39.7 percent in September. Raw milk and slaughter-chicken prices also declined at earlier stages of production.
What Happens Next
The September reports will likely intensify scrutiny of Trump's economic record through the final weeks of the midterm campaign.
For Trump and Republicans, the risk is that voters will judge the economy less by overall growth or financial-market performance and more by the actual prices they encounter at gas stations and grocery stores.
“This creates a real issue for those seeking reelection during the midterms, as many who are growing increasingly angry at rising costs could take those concerns out on lawmakers currently in power,” Beene said.
Newsweek’s reporters and editors used Martyn, our AI assistant, to produce this story. Learn more about Martyn here.
Contact Newsweek editors on this story: Anna Skinner and Dave Siminoff.