September PPI Shatters Forecasts: +1.3% m/m Is the Biggest Monthly Jump Since March 2022, +6.3% y/y the Largest Since December 2022 — Core Hits 5.0%

September PPI Shatters Forecasts: +1.3% m/m Is the Biggest Monthly Jump Since March 2022, +6.3% y/y the Largest Since December 2022 — Core Hits 5.0%

The release (Thursday Oct 15, per 24/7 Wall St.'s Oct 22 write-up): September PPI rose +1.3% m/m vs +0.5% expected — the biggest monthly jump in more than four years (biggest since March 2022) — and +6.3% y/y vs +5.3% expected, the largest 12-month increase since December 2022. Core PPI ran +0.7% m/m vs +0.3% expected and 5.0% y/y vs 4.4% expected — its highest since January 2023. BLS's homepage confirms the +1.3%(p) preliminary print. Food-industry press attributed the jump to the war's logistics premium passing through the producer chain — diesel and warehousing costs hitting food businesses¹ (Meatingplace: "September producer prices jump as diesel, warehousing hit food biz").

The pipeline math is what matters for the Oct 27-28 FOMC and the September PCE print due ~Oct 30 (tracked in Sept 30 Verdict: BEA Revision Cuts Core PCE to 3.0% (–36bp, More Than Expected) — October Hike Odds Collapse to ~37%, Q2 GDP Revised Up to 2.2%): PPI components feed PCE directly, and CPI/PPI-based tracking already puts September core PCE at ~3.1% y/y vs 3.0% in August. Per 24/7 Wall St.: "Producer prices tend to show up in consumer prices later, so a 5.0% core PPI rate suggests inflation is still building at the wholesale level."

This stacks on Wednesday's CPI shock (September CPI: Headline Jumps to 3.7% y/y on a 9.1% Gasoline Spike — Core Picks Up to 2.6% as Pressure Broadens Past Energy, and Real Wages Fall for a Second Straight Month: +0.6% m/m, 3.7% y/y) and landed one day before Warsh's Bangkok comments crashed October hike odds from ~55% to ~15% (December Hike Unanimous in Reuters Poll (100/100) as Economists Say Skip October — "Treading Water" Criticism, Peak Seen at 4.00–4.25%, PCE Not Back at 2% Until 2028, 10-Year Holds ~5.13% as the AI Trade Bounces Back — SOX Snaps an Eight-Day, ~15.7% Slide — While the Front End Prices ~83% October Hold and ~75% December Hike). Susan Schmidt of Exchange Capital Resources, on Marketplace (quoted by 24/7 Wall St.): the hot CPI "with core inflation also above expectations, increases pressure on the Fed to raise rates at the October meeting rather than waiting until December." Markets still price an October hold (~15-21% hike odds) and a ~75-79% December hike — but a 5% core-PPI pipeline is the strongest argument the skip becomes a hike.

Producer-side mirror of the diesel squeeze (Diesel Squeeze: Record $6.53, OPEC+ Holds Quotas, Iran Keeps Hormuz Shut — No Relief for Pump, Truck and Food Costs): US refineries running 95-100% of capacity (API, per OilMonster) and Valero's record quarter (Pump Squeeze (Oct 22): Valero Posts the Record That Explains the Pump — $6.8B Profit, Refining Margin $39.24/bbl (Nearly Tripled) — While Gasoline Eases to $4.27 and Diesel Sticks at $6.31) mean margins, not volumes, are absorbing the shock — and passing it downstream.