Great news America - your standard of living just dropped little more as producer prices rose by 2.6% YoY in September, the fastest rate of increase since Feb 2012 - driven by a surge in energy prices.

Some highlights:

  • Final demand producer prices rose 0.4% in September (as expected)
  • Final demand ex food, energy rose 0.4% m/m vs est. up 0.2%
  • Final demand rose 2.6% y/y, matching estimate
  • Final demand ex food, energy rose 2.2% y/y vs est. up 2%
  • Final demand ex food, energy and trade services rose 0.2% m/m
  • Final demand personal consumption rose 0.5% m/m
  • Final demand personal consumption rose 2.3% y/y
  • Health care services (NSA) rose 1.4% y/y; unchanged m/m

However, Energy prices seem to be the biggest driver...

The index for final demand services increased 0.4 percent in September, the largest rise since moving up 0.5 percent in April. Over 60 percent of the September advance can be traced to a 0.8-percent increase in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Prices for final demand goods rose 0.7 percent in September, the largest increase since moving up 1.0 percent in January. Over 80 percent of the September advance can be traced to the index for final demand energy, which climbed 3.4 percent. (Higher energy prices were likely the result of  reduced refining capacity in the Gulf Coast area due to Hurricane Harvey.)

This no doubt relieves some pressure on the 'transitory' Fed - enabling higher rates (and yet lower living standards)