Producer prices rose sharply last month, once all components are included from the tabulations. Specifically, The Labor Department reported that the Producer Price Index, the principal gauge of wholesale pricing across the country, jumped by 1.1% in September. That was a notably bigger advance than the 0.7% generally forecast by economists.

The month's gain, which came principally on soaring energy costs, with a slight assist from higher food prices, represented a modestly less worrisome increase than in August when the PPI surged ahead by an outsized 1.7%. If we back out the food and energy components, to get the so-called core PPI figure, we find an unchanged reading for the latest month, suggesting that there still is little underlying pricing strength across the slowly progressing domestic economy.

According to some observers, in spite of the big jump in the overall PPI, there is likely to be little pass-through to consumers given the sluggish pace of job creation across the country. Non-farm payrolls, it should be remembered, rose by a modest, and hardly eye catching, 114,000 last month.

As for this latest inflation survey, the Labor Department noted that aggregate energy costs soared by 4.7% last month. Even that gain, though, was less than in the previous month when energy costs had skyrocketed by 6.4%. Meanwhile, outside of energy and to a much lesser extent food, the PPI was held in check by a decline in the cost of communications equipment.  

As to food, prices gained 0.2% last month, which was the smallest advance since May, when food costs had actually declined by 0.4%. In June, July, and August, such costs had risen by 0.5%, 0.5%, and 0.9%, respectively. The principal contributors to the food price increase last month were dairy products and fresh fruits.

All told, the annual rate of change in the PPI was 2.1%. That was the biggest rate of increase since March, though it was still largely within the Federal Reserve's inflation parameters. As to energy, we have just seen large back-to-back increases in this component. Those gains follow five straight monthly declines, attesting to the high degree of volatility in this inflation component, and underscore the validity of also issuing a core reading for producer inflation along with the overall figure.

On balance, this report was not a game changer, and does little to modify the overall benign inflation picture, nor will it, we sense, alter the present aggressive monetary course being taken by the Federal Reserve, which just recently embarked on another round of quantitative easing.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.