U.S. producer price inflation comes in a little hotter in September, highest annual rate in five months

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The numbers: The U.S. producer price index rose 0.5% in September, the Labor Department said Tuesday, down slightly from an 0.7% increase in August.

Economists polled by The Wall Street Journal had forecast a 0.3% advance.

The core producer price index, which excludes volatile food, energy prices, and trade services rose 0.2% in September for the second straight month.

Over the past year, headline PPI is up 2.2% in September, up from 2% in the prior month. This is the highest rate since April.

Core prices are up 2.8% from a year earlier, down slightly from 2.9% in August.

Key details: For the second straight month, goods prices outpaced service costs, a break in the recent trend.

The cost of goods rose 0.9% in September after a 2% gain in the prior month.

The cost of services rose 0.3% last month, up slightly from 0.2% in August.

Energy prices rose 3.3% in September, down from a 10.3% gain in the prior month but still a strong gain.

Wholesale food prices jumped 0.9% after a 0.5% fall in the prior month.

Big picture: The inflation data was hotter than expected but still well below readings recorded a year ago. The PPI report is getting more attention because it is coming before the critical consumer inflation report for Thursday.

What are they saying? “Overall, these data likely do not change the outlook for Fed policy. Our baseline remains that rates are at a peak. For the Fed, geopolitical developments will be an additional risk factor which will likely keep policymakers proceeding cautiously going forward, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

Market reaction: Stocks
DJIA

SPX
were set to open higher Wednesday while the 10-year Treasury yield
BX:TMUBMUSD10Y
gave back some of its losses after the PPI report but was still down 7 basis points to 4.59%.

See also: Use MarketWatch’s tool to search for the producer price index of almost 600 products

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