WASHINGTON (AP) — Wholesale inflation rose more than expected last month on a sharp rise rising fuel prices as rising prices become a bigger economic challenge for millions of Americans and a growing political problem for Republicans in the upcoming midterm elections.
The Labor Ministry’s producer price index – which measures inflation before it reaches consumers – climbed 6.3% in September year-on-year, up from 5.6% in August and the biggest increase since December 2022, the government announced Thursday.
On a monthly basis, wholesale prices increased by 1.3% from August to September, representing the largest increase since March 2022, following a 0.5% increase in the previous month.
Data indicates that rising fuel prices, particularly diesel fuel used by long-haul trucks and freight trains, are driving up the costs of shipping and storing goods.
This is starting to drive up the cost of food, an area where prices appear to have fallen this year. Wholesale food prices jumped 1.2% between August and September, although they were still unchanged from a year ago.
Transportation and warehousing prices climbed 3.4% last month and are 16% higher than a year ago, according to the report.
“Rising transportation prices affect all goods in the economy, as manufacturing inputs move to factories and goods at all stages of production move from producer to wholesaler to retailer by truck, train or rail,” Carl Weinberg, chief economist at High Frequency Economics, wrote in a client note. “This is how rising energy prices are reflected in the prices of basic goods. »
Farmers also rely on diesel to power most of their equipment, which could also drive up food prices. Diesel prices averaged $6.32 per gallon nationwide Thursday, according to AAA, up from just $3.66 a year ago.
Thursday’s report amplifies the consumer price index published Wednesday, which also accelerated in September with rising gas prices. But a wide range of goods and services have become more expensive.
The two inflation reports increase pressure on inflation fighters at the Federal Reserve to raise their key interest rate. Inflation has remained above the central bank’s 2% target for five and a half years.
Excluding the volatile food and energy categories, underlying prices rose 0.7% from August to September, up sharply from 0.2% the previous month. Compared to last year, underlying prices increased by 5%, compared to 4.6% in August.
More expensive energy is driving most of the rise, with wholesale gas prices soaring more than 20% between August and September. But the report also shows that other costs are increasing, including those for electricity, vegetables, transportation and plane tickets.
Continued inflation has eroded Americans’ incomes and soured most consumers on the economy. The Labor Department said Wednesday that for the first time since May, average weekly wages, adjusted for inflation, fell compared to the same month last year.
Rising prices have damaged Trump’s reputation with American voters. A new AP-NORC poll found that about 8 in 10 registered voters disapprove of Trump’s handling of the cost of living, while about three-quarters disapprove of his handling of the economy.
The Federal Reserve, meanwhile, will hold a policy meeting in two weeks and may keep its key short-term rate unchanged. However, after two hot inflation reports this week, some economists now expect rates to rise. Officials expect at least one further rate hike this year.
Fed Chairman Kevin Warsh speaks at an international economic conference in Bangkok on Thursday evening and his remarks will be closely watched for whether or not he supports a rate hike this month.
The Fed uses higher rates to slow borrowing and spending in an effort to reduce inflation.
This did not prove effective as hoped this year.
After a rate hike in September, the United States announced on Thursday that retail sales increased faster than expected during the same month. Much of that spending, however, went to gas stations, where Americans pay more to fill up their cars.
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