US producer prices rise 6.5% year-on-year, highest since November 2022

US producer prices rose 0.3% in October from September, slightly below the 0.4% expected by markets, according to the latest producer price inflation report. The annual rate nevertheless accelerated to 6.5% from 6.3% in September, the highest year-on-year print since November 2022. Core producer prices, which exclude food and energy, also rose 0.3% month-on-month and 5.0% year-on-year. Goods prices rose faster than services costs, and both increased for a third straight month.

The report showed energy prices falling on a monthly basis while their year-on-year pace accelerated, with fuel inflation described as dominant. Food prices were soaring, and AI-linked demand was reflected in a recent surge in memory chip prices that has stabilized but not fallen. Intermediate demand, a measure of costs earlier in the production pipeline, was described as soaring, pointing to continued cost pressure inside the economy rather than a one-month price spike.

The data followed a hotter-than-expected consumer price report earlier in the week, reinforcing a pattern in which inflation is not disappearing evenly. Producer prices measure costs received by manufacturers and suppliers, so they can move before retail prices, although pass-through depends on competition, inventory and contracts. The source also pointed to a producer-price-to-consumer-price spread that signals margin pressure for companies, suggesting firms are absorbing some cost increases even as input costs rise.

The result keeps inflation risk in view for households, businesses and financial markets. Higher wholesale costs can squeeze corporate margins or be passed to buyers, while the report said market pricing for a 50 basis-point rate increase remained at 15%. That leaves borrowing costs a live concern for mortgages, credit cards and corporate financing, even as stocks appeared not fully priced for that possibility.