Energy price surge halts and service cost growth slows, cooling monthly inflation.
Year-on-year increase hits 6.5%, the highest since November 2022, with September figures revised upward.
US producer prices rose less than expected in October. While energy prices declined and the pace of service cost increases slowed, prices for food and transportation continued to climb. As the monthly growth rate for core metrics excluding volatile items remained steady, it is premature to conclude that overall price stability has been achieved.
The US Bureau of Labor Statistics (BLS) announced on the 13th (local time) that the Producer Price Index (PPI) for final demand rose 0.3% month-on-month on a seasonally adjusted basis, falling short of the 0.4% market consensus. The PPI, which measures the change in prices received by producers for goods and services, serves as a key indicator for future consumer price trends.
The core PPI, which excludes volatile food and energy components, rose 0.3% month-on-month and 5.0% year-on-year, both in line with expectations. Monthly growth for both the headline and core indices slowed compared to September.
The deceleration was most pronounced in the energy and service sectors. Energy prices, which had surged 10.0% in September, fell 0.1% in October, with diesel prices dropping 7.9%. Service price inflation also cooled from 1.0% to 0.2% over the same period. Notably, the trade services index, which reflects the distribution margins between wholesale and retail prices, shifted from a 2.1% increase to a 0.2% decline.
Conversely, food prices rose 1.3% month-on-month, and prices for goods excluding food and energy rose 0.5%. Truck freight transportation costs also climbed 3.9%. Even as energy prices stabilized, inflationary pressures persisted in food, certain goods, and transportation sectors.
The monthly growth rate of the PPI excluding food, energy, and trade services remained at 0.5%, unchanged from September. Unlike the headline PPI, the underlying pace of inflation for these items has not yet slowed. However, the year-on-year growth rate for this specific metric eased slightly from 5.0% in September to 4.9% in October.
Previous figures were revised upward. The September month-on-month headline PPI was adjusted from 1.3% to 1.4%, and the core PPI from 0.7% to 0.8%. While the October increase was more moderate, the inflationary pressure in the preceding month proved stronger than initially reported.
The year-on-year headline PPI rose from 6.3% in September to 6.5% in October, marking the highest level since November 2022, though it remained below the market forecast of 6.6%. The rise in the annual rate despite a slower monthly increase is attributed to the low base effect from October of last year. Although energy prices dipped slightly in October, they remain 37.0% higher than a year ago.
Financial markets have been focused on the Federal Reserve's potential interest rate hike in December. The Consumer Price Index (CPI) for October, released on the 10th, rose 0.4% month-on-month, exceeding the 0.3% estimate.
While the lower-than-expected headline PPI may partially alleviate concerns over further aggressive tightening, the persistent monthly growth in metrics excluding food, energy, and trade services suggests that more data is needed to confirm price stability. Future observation will focus on whether energy prices rebound and whether price pressures in sectors like food and transportation begin to subside.
