September's producer price index came in much hotter than economists forecasted on Thursday, underscoring the continued inflationary pressure from energy amid the U.S. war with Iran.
The measure of underlying inflation pressures climbed 1.3% in September and 6.3% on an annual basis, according to the Bureau of Labor Statistics. That marked the largest monthly and annual gains since March 2022 and December 2022, respectively.
Both readings topped expectations of economists polled by Dow Jones, who forecasted an advance of 0.6% on the month and 5.5% annually.
Energy drove a sizable chunk of those increases as the Middle East conflict curtailed oil supply and sent prices surging. So-called core PPI, which excludes volatile food and energy prices, added 0.7% on the month and 5% over the 12-month period.
But there are signs that soaring energy prices are having down-stream effects on other categories. The BLS said in Thursday's release that almost half of September's increase in processed goods for immediate demand was connected to the rise in diesel fuel prices.
It's the latest report in recent days showing that inflation continues to hit consumers and companies.
Wednesday's consumer price index release showed an increase of 0.6% from August to September and 3.7% on a 12-month basis. Economists polled by Dow Jones had forecasted growth of 0.6% and 3.6%, respectively.
So-called core CPI, which removes volatile food and energy costs, added 0.3% on the month and 2.6% compared with a year ago. Economists anticipated increases of 0.2% and 2.5%, respectively.
Wednesday's Beige Book, a chronicle of economic activity published by the Federal Reserve, had the highest number of mentions of terms related to inflation on record, according to an analysis from Bespoke Investment Group.
Retail sales grew 0.8% in September, surpassing the rate of 0.4% anticipated by economists, according to government data released Thursday. But it marked a slowdown from a month prior, when retail sales rose by more than 1%.
Excluding spending on autos and gas stations, retail sales increased 0.25% from August to September, a drop from around 1.1% in the prior period. This slowdown offers a sign that high prices related to fuel is causing consumers to tighten the belt elsewhere.
This week's data has left a growing minority of Fed funds futures traders expecting the central bank to raise rates at its meeting later this month. Traders are now pricing in a nearly 34% likelihood that the Fed hikes borrowing costs, up from under 18% a week prior, according to CME's FedWatch tool.
"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, investing chief at Northlight Asset Management.
These reports offer some of the final insights into the pace of inflation in the U.S. ahead of the midterm election, which could impact how much power each political party has in Washington.