The Bureau of Labor Statistics reported that producer prices rose 1.1 percent in September, building on the 1.7 percent gain of August. The primary driver of the increases in the past two months has been higher energy costs, up 6.4 percent and 4.7 percent in August and September. Food prices were also higher, but these effects were mainly at the intermediate and crude levels.
Core prices — which exclude food and energy costs — were unchanged. This suggests that overall inflationary pressures remain modest, at least for now. Finished producer prices have risen 2.2 percent in the past 12 months, with core prices up 2.3 percent.
For manufacturers, producer prices rose 1 percent in September, or 2 percent year-over-year. The past two months have been the beginning of an uptick in pricing pressures after some easing in raw material costs over the spring and summer. Sectors with the fastest growth in input prices include petroleum and coal products (up 5.5 percent), primary metals (up 1.2 percent), food products (up 0.7 percent), wood products (up 0.6 percent), and chemicals (up 0.5 percent). The top manufacturing sectors with declining costs, though, were textile mills, computer and electronic products, and furniture (all with a gain of 0.4 percent).
Meanwhile, costs of intermediate and crude goods rose 1.5 percent and 2.8 percent, suggesting continued pricing pressures down the line in the production process. This was mainly due to increased food and energy prices. Sharply higher feeds costs — presumably the result of the recent drought — lifted overall food prices.
The increase we are seeing in energy prices shows how important it is we move forward with an “all-of-the-above” energy strategy to reduce energy costs for consumers and businesses.
BLS will release consumer price data on Tuesday, which should show similar results.
Chad Moutray is chief economist, National Association of Manufacturers.
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