The upward revisions wiped out previous monthly PPI readings.
By Wolf Richter for WOLF STREET.
The price inflation faced by businesses – tracked by the final demand producer price index (PPI) – accelerated to 6.5% year-on-year in October, the worst inflation for businesses since November 2022 (red in the chart). It has accelerated in a zigzag pattern since the low point in mid-2023, during which the Fed lowered its key rates as if to encourage this process.
The previous monthly increase (for September) was revised to +1.41% (+18.3% annualized) and took it out of the chart (blue line in the chart).
In October, the monthly increase of 0.35% (+4.3% annualized) added to the September peak, according to data released today by the Bureau of Labor Statistics.
Services purchased by businesses represent 68% of overall PPI. In October, services inflation accelerated to reach 5.0% year-on-year. Core goods inflation accelerated to 5.2%, its worst level since January 2023. Energy inflation climbed 36.8%. Prices for food purchased by businesses, such as packaged food manufacturers, rose 1.7% year-over-year, but climbed worryingly month-over-month for the second month in a row. The “core” PPI, which excludes food and energy, accelerated slightly to 5.0% year-on-year, the worst since December 2022.
Inflation has been much worse for businesses (6.5% year-on-year) than for consumers, although inflation has also accelerated for consumers, with the Consumer Price Index accelerating to 4.0% year-on-year in October.
Basic final request for the PPI, which reflects the overall PPI minus the energy and food components, accelerated slightly to 5.0% year-on-year, the worst since December 2022 (red in the chart below).
The core PPI has been zigzagging upwards since the January 2024 low point.
From one month to the next, the September rate was revised upwards, to 0.82% (+10.3% annualized) compared to the 0.68% initially announced (+8.5% annualized, blue).
In October, it increased by 0.33% (+4.0% annualized), beyond the upwardly revised month of September.
PPI services accelerated slightly to reach 5.0% year-on-year. October, September and April – all around 5.0% – were the worst since December 2022 (shown in red in the chart below).
On a month-to-month basis, the September peak was revised even higher to 1.00% (+12.6% annualized) and pushed it off the chart (blue line).
The monthly increase of 0.21% in October (+2.6% annualized) was added to the unusual, upwardly revised peak in September.
Services represent 68% of the overall final demand for PPIs.
The transport & warehousing PPIwhich is part of the services PPI, climbed 14.0% year-on-year, the worst since October 2022 (red). It zigzags ever higher from the low point with negative values of July 2023.
Month over month, it climbed 2.4% (+33.3% annualized, blue), due to rising input costs (red).
The PPI of commercial services, which is also part of the services PPI, accelerated to 5.7% year-on-year, the worst since April (red). This range is about double the normal range before the pandemic.
Month over month, the September peak was massively revised upwards to +2.29% (+31.2% annualized), from the previously reported +1.38% (+17.8% annualized), and pushed it off the chart.
In October, the index did not add further gains to September’s massively revised rise.
The PPI for basic goods, which excludes energy and food components, rose 5.2% year-on-year, the worst since January 2023, after surpassing the highs of earlier this year.
It has been zigzagging upwards since March 2024.
From one month to the next, the index increased by 0.55% (+6.8% at an annualized rate).
The PPI for energy was essentially unchanged month-over-month and up 36.8% year-over-year.
The chart shows the energy PPI price level, not the percentage changes. The price level in September and October exceeded the June 2022 peak.
The final demand of the PPI for food products facing companies, such as packaged food manufacturers, increased month-on-month by 1.34% (+17.3% annualized), following the peak of 1.05% in September, following three consecutive negative results in June, July and August. The peaks recorded in September and October suggest a potential reacceleration of food inflation.
The September and October increases pushed the year-over-year food PPI to a 1.7% increase, following a run of flat to negative numbers.
Skyrocketing food inflation occurred between mid-2020 and 2022, when food prices soared by around 31%, only to peak and fall in 2023.
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