The Bureau of Labor Statistics said that producer prices for final demand goods and services rose by 0.4 percent in September, its fastest pace since April. For manufacturers, producer prices for final demand goods were up by 0.2 percent for the second straight release. The gain in September stemmed largely from an acceleration in energy prices, up 3.4 percent, extending the 3.3 percent gain seen in August. Indeed, the cost of West Texas intermediate crude rose from $47.26 per barrel on August 31 to $51.67 a barrel on September 29, helping to illustrate the recent increases in energy costs for producers. A fair share of the pickup in energy prices stem from recent hurricanes, perhaps making them transitory in nature.
In contrast, food prices were flat in the latest data. On a year-over-year basis, final demand food and energy costs have risen 1.2 percent and 10.6 percent, respectively. Excluding food and energy, producer prices for final demand goods were up by 0.3 percent in September.
Overall, producer prices for final demand goods and services have increased 2.5 percent since September 2016, up from 2.4 percent year-over-year last month and returning to the pace seen in April. Raw material costs have accelerated over the course of the past 12 months, as the year-over-year rate was 0.7 percent one year ago. Nonetheless, core producer prices – which exclude food, energy and trade services – continue to be modest, hovering around the Federal Reserve’s target rate of 2 percent. In this Core inflation was 2.1 percent year-over-year in September, edging up from 2.0 percent in August. For comparison purposes, core producer prices were 1.4 percent year-over-year in September 2016.