U.S. producer prices climb at highest annual rate in four years

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Producer Price Index shot up 6.5% year-over-year in October, after gaining 6.3% the month before

U.S. producer prices increased further in October, leading to the largest annual gain in four years and supporting expectations that the Federal Reserve could continue raising interest rates after next month’s widely expected hike.

The Producer Price Index for final demand rose 0.3 per cent last month after an upwardly revised 1.4 per cent surge in September, the Labor Department’s Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast the PPI climbing 0.4 per cent after vaulting 1.3 per cent in September.

Producer prices last month were lifted by a 0.5 per cent rise in goods, mostly food and basic organic chemicals. Services increased 0.2 per cent, advancing for the fifth straight month.

The PPI shot up 6.5 per cent year-over-year in October, the largest annual gain since November 2022, after advancing 6.3 per cent in September.

The report followed news this week of a stronger-than-expected increase in consumer prices in October. Nonfarm payrolls surged in October and the unemployment rate dropped to 4.1 per cent from 4.2 per cent in September, the government reported last week.

That, together with comments from US central bank Governor Christopher Waller, have left financial markets wavering between pricing in a 25-basis-point rate hike in December and leaving room for half-a-percentage-point increase. Financial markets anticipated another increase in borrowing costs in January, CME’s FedWatch tool showed. The Fed left its benchmark overnight interest rate in the 3.75-4.00-per-cent range last month.

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