An energy price shock is working its way through the US economy, with businesses passing higher costs on to customers. Bureau of Labor Statistics data reported by Bloomberg showed the consumer price index rose to a five-month high in September, while the producer price index hit its highest level in more than four years.
Freight and food costs climb
Producer prices for food climbed 1.2 percent month-on-month, and the price of prepared animal feed rose 2.3 percent month-on-month. Wholesale and retail margins, as captured in the producer price data, increased 1.4 percent month-on-month.
The Fed’s Beige Book reported firms citing higher diesel prices, with fuel surcharges passing through supply chains. Grocery store food prices slipped slightly in the September CPI reading, helped by cheaper beef, pork and eggs. Demand for chips and building materials tied to data center construction also added to price pressures. US annual inflation stood at 3.7 percent in September, near its 31-day high.
Fed seen holding steady
Veronica Clark, a Citigroup economist, said there is no clear evidence that energy prices are broadly pushing up consumer goods prices, noting that furniture and household appliances were not affected by the increases. She said upcoming CPI data may be moderate and, combined with restrained wage growth, could encourage the Fed to look through the energy price shock.
Investors expect the Fed to hold rates unchanged at its October 27-28 meeting. Weekly inflation data have reinforced expectations of rate increases in December and into next year.
Related: US Producer Prices Rise 1.3% in September, Above Forecast
Source: Federal Reserve · US Bureau of Labor Statistics | Data: FRED — St. Louis Fed
