Breitbart Business Digest: Inflation Is Spreading

Inflation Has Escaped the Gas Station

September’s inflation reports came drenched in gasoline. Unfortunately, there are signs that inflation is heating up outside of the energy complex.

The Labor Department said Thursday that the producer price index jumped 1.3 percent last month, the biggest increase since March 2022, and is up 6.3 percent for the year. Coming a day after the consumer price index showed inflation rising to 3.7 percent, that’s enough to give people unwelcome flashbacks to the Bidenflation years.

It’s Not Just Gasoline and Oil Anymore

Prices for goods in the producer price index rose 2.6 percent in September and are up 9.8 percent from a year ago. To be sure, more than 80 percent of that increase came from energy, where prices jumped 10.8 percent. Gasoline alone accounted for half the goods increase, with prices soaring 20.3 percent. Diesel prices for intermediate demand rose 21.0 percent, helping explain why the transportation and warehousing price index climbed 3.4 percent in September alone. For the year, transportation and warehousing prices are up 16.0 percent.

But even if we strip food and energy prices out of the producer price index’s goods measure, the monthly increase was still a too-high 0.3 percent. For the year, core goods are up 5.1 percent. The year-over-year core goods index has been above five percent for five straight months.

Prices for durable consumer goods are up 3.6 percent from a year ago and rose 0.3 percent in September, according to the PPI. The CPI report released Wednesday showed even more inflation on this front last month, with durables rising 0.9 percent for the month (although it has durables flat year-over-year).

The PPI also tracks a special index for personal consumption goods excluding energy. This jumped 0.4 percent in September, although it is only up 1.7 percent from a year ago.

Services prices rose 0.8 percent last month, and they are up 4.9 percent from a year ago. Excluding trade services, transportation, and warehousing brings the monthly services increase down to 0.3 percent. For the year, this is running at 3.8 percent.

Core PPI, which excludes food and energy, rose 0.7 percent, more than double the 0.3 percent economists expected. The measure excluding food, energy, and trade services increased 0.5 percent and was up 5.0 percent over the year.

In short, we have an inflationary oil spill that is now contaminating the broader economy.

Estimates following the CPI and PPI releases have September’s personal consumption expenditures price index rising around 0.51 percent, according to the Wall Street Journal‘s Nick Timiraos. That would be a big jump from August’s 0.31 percent. Core PCE prices are forecast to rise around 0.34 percent for the month, up from August’s 0.25 percent. That would lift the PCE inflation annual rate to about 3.6 percent and the core rate to 3.1 percent.

We won’t get these numbers until the day after the Federal Reserve’s next meeting, but the Fed officials won’t have to wait for the announcement to know where their index is headed.

Consumers Are Still Buying

The high price of gasoline has not deterred American shoppers. Retail sales rose 0.8 percent in September and were up 6.3 percent from a year earlier. Using the monthly CPI increase as a rough adjustment suggests real sales rose about 0.2 percent.

Of course, a big part of that was gas station sales. Excluding gas stations, retail sales rose 0.2 percent in September and are up 4.5 percent from a year ago.

There’s some impressive strength beneath those figures. Grocery store sales picked up 0.5 percent even though grocery prices fell a tenth of a point according to CPI. Furniture store sales jumped 1.3 percent despite furniture and bedding prices falling 0.8 percent. Electronic store sales rose 0.6 percent. Health and personal care store sales rose 0.7 percent. Sales at bars and restaurants jumped 1.1 percent, easily beating the 0.2 percent price increase recorded in CPI.

The regional Fed factory surveys are also showing continued expansion. The Empire State manufacturing index jumped to 25.5 from 7.6, its strongest reading in nearly five years, with new orders rising markedly. The Philly Fed’s index remained solidly positive at 20.9, although it declined from September, and new orders slowed. Factories are feeling the strain without collectively retreating.

This strength, however, probably will make it easier for the Fed to decide to hike rates. An energy shock accompanied by collapsing demand would give policymakers a clearer reason to wait. Continued spending and factory expansion will likely give them more confidence that the economy can withstand higher rates.