Monday, May 27, 2024
HomenewsHigh energy costs spike prices at the pump in September

High energy costs spike prices at the pump in September

The producer price index (PPI), which measures wholesale prices, spiked higher than anticipated Wednesday on the back of high energy prices, Bureau of Labor Statistics (BLS) data showed.

The PPI jumped 0.5 percent in September, slightly higher than the 0.3 percent economists polled by Reuters expected. For the year, prices jumped 2.2 percent, “the largest increase since moving up 2.3 percent for the 12 months ended in April,” the BLS said.

“Nearly three-quarters of the broad-based September advance is attributable to a 3.3-percent rise in prices for final demand energy,” the bureau added.

Core prices, which strip out the volatile food and energy sectors, were up 0.2 percent, the fourth time in a row they have increased. For the year in September, core prices rose 2.8 percent.

These wholesale inflation measures come ahead of the closely watched consumer price index, which tracks what consumers pay for goods and services. That index will be released Thursday as Federal Reserve policymakers get ready to meet next month to decide on what to do about interest rates.

Since March 2022, the Fed has raised rates to slow down historic increases in inflation that at one point hit four-decade highs. The central bank’s hike in the federal funds rate to the current 5.25 to 5.5 percent range has significantly pushed up borrowing costs for both consumers and businesses.

The rise in energy prices affected wholesale inflation, accelerating the PPI by 4.8 percent in the third quarter on an annual basis, compared with a 1.3 percent decrease in the previous quarter, Matthew Martin, U.S. economist for Oxford Economics, pointed out.

“While we would expect the Fed to look past volatility in the energy market, less encouraging is the pickup in core services momentum,” Martin wrote in reaction to the PPI news. “Officials are committed to reigning in inflation, but we expect prices to slow enough over the coming quarters to keep additional rate hikes off the table.”

Gas prices were higher in September because of the high cost of oil, according to the AAA. In California, for example, average prices hit nearly $6 a few weeks ago.

Looking ahead, Martin suggested that things may slow down this month. “Oil prices have moderated this week, which is encouraging news for October’s report,” he wrote.

The BLS said prices for goods, which saw a jump of 0.9 percent, also felt the pressure from higher fuel costs. “Over 40 percent of the September increase in prices for final demand goods can be traced to a 5.4-percent rise in the index for gasoline,” BLS said.

Prices for jet fuel, processed young chickens, meats, electric power and diesel fuel also accelerated. In contrast, fresh and dry vegetables saw a drop of 13.9 percent. Prices for wood pulp and utility natural gas also fell, the BLS said.

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