Wholesale inflation heated up again last month, reversing recent progress

US wholesale inflation increased in October, indicating ongoing price pressures at the producer level. The Producer Price Index (PPI), which measures average price changes for producers and manufacturers, rose 0.2% monthly and 2.4% annually. This marks an increase from September's 0.1% monthly and 1.9% annual rise. Economists had anticipated price hikes due to base effects from the previous year's sharp slowdown in wholesale inflation. The index saw limited impact from falling energy prices, which decreased only 0.3% in October, compared to September's 2.8% drop. However, wholesale food prices fell 0.2%, contrasting with September's 1% increase. Core PPI, excluding food and energy, increased 0.3% monthly, up from 0.2% in September, and rose 3.1% annually. Economists had forecast a 0.2% monthly and 3% annual gain. The PPI hints at potential future retail-level inflation. Transportation costs surged, likely due to elevated demand from hurricane-affected regions. The unexpected PPI data prompted some economists to adjust their estimates for October's Personal Consumption Expenditures (PCE) price index. The base effects are projected to influence inflation forecasts. October's PPI aligns with recent Consumer Price Index trends, which reflect a 2.6% annual increase. Despite challenges, the overall trend has been deflationary. Yet, the path to price stabilization is uncertain, with potential inflation risks such as geopolitical tensions and proposed tariffs looming. Goods prices are expected to stay in focus, as tariffs could raise factory costs.