Supplier-Price Report to Offer Clues on September Inflation Trend

The Labor Department will release the PPI report at 8:30 a.m. EST Wednesday. The department’s closely watched report on consumer inflation will be released on Thursday at the same time.

Economists surveyed by The Wall Street Journal estimate there was a modest increase in supplier prices in September compared with the prior month, with the core figure, excluding volatile food and energy prices, easing slightly. Annually, PPI rose by 8.7% in August, down from annual increases of 9.8% in July and 11.2% in June.

Along with being a helpful tool for forecasting inflation, producer-price indexes are often used as the basis for automatic adjustments in supplier contracts. The Bureau of Labor Statistics estimates that trillions of dollars in long-term contracts are pegged to versions of the PPI.

Investors and the Fed are watching for signs that persistently high inflation is easing. U.S. consumer prices overall rose more slowly in August from a year earlier. But core prices increased sharply from the prior month, showing that inflation pressures remained strong and stubborn.

Hiring lost some momentum in September, but remained strong, with the September unemployment rate of 3.5% matching half-century lows. Wage growth has begun to slow, with average hourly earnings rising 5% in September from a year before—still rapid but below August’s 5.2% pace and the slowest annual rate since December 2021.

Prices have begun to fall for some goods and services, including commodities, freight shipping and housing. Those declines have led some Fed watchers to warn that the central bank risks tightening financial conditions too much.

“Leading indicators of inflation and macroeconomic forces strongly point to lower inflation ahead,” said David Kelly, chief global strategist at J.P. Morgan Asset Management. “They could inflict an unnecessary recession on American families, while doing little to improve productivity or living standards.”

Fed officials this week said they remain committed to raising rates, at least through early next year.

“Monetary policy will be restrictive for some time to ensure that inflation moves back” to the central bank’s 2% target, Fed Vice Chairwoman

Lael Brainard

said Monday. “It will take time for the cumulative effect of tighter monetary policy to work through the economy and to bring inflation down,” she said.

The Fed has raised the benchmark federal-funds rate at its last three meetings by 0.75 percentage point, most recently last month to a range between 3% and 3.25%. Officials have indicated they are prepared to raise rates over the course of their final two gatherings this year to around 4.25%.

Some economists say the impacts of interest-rate increases can take time to show up in the economy, a dynamic that the Fed should take into account when making decisions. Wholesale prices of used cars have been dropping in recent months, for example, but that shift isn’t yet fully reflected in government figures. Calculations for housing prices and residential rents can also lag.

Coming earnings reports from big banks, including

JPMorgan Chase

& Co. and

Citigroup Inc.,

and consumer-facing companies such as

PepsiCo Inc.,

Delta Air Lines Inc.

and

Walgreens Boots Alliance Inc.

could include more insight into how monetary policy is affecting the economy.

Companies are trying to manage higher costs without alienating consumers who are weary of price increases. Some firms also are contending with the negative effects of a surging dollar on revenue generated in other countries.

Write to Gabriel T. Rubin at [email protected]

The Labor Department will release the PPI report at 8:30 a.m. EST Wednesday. The department’s closely watched report on consumer inflation will be released on Thursday at the same time.

Economists surveyed by The Wall Street Journal estimate there was a modest increase in supplier prices in September compared with the prior month, with the core figure, excluding volatile food and energy prices, easing slightly. Annually, PPI rose by 8.7% in August, down from annual increases of 9.8% in July and 11.2% in June.

Along with being a helpful tool for forecasting inflation, producer-price indexes are often used as the basis for automatic adjustments in supplier contracts. The Bureau of Labor Statistics estimates that trillions of dollars in long-term contracts are pegged to versions of the PPI.

Investors and the Fed are watching for signs that persistently high inflation is easing. U.S. consumer prices overall rose more slowly in August from a year earlier. But core prices increased sharply from the prior month, showing that inflation pressures remained strong and stubborn.

Hiring lost some momentum in September, but remained strong, with the September unemployment rate of 3.5% matching half-century lows. Wage growth has begun to slow, with average hourly earnings rising 5% in September from a year before—still rapid but below August’s 5.2% pace and the slowest annual rate since December 2021.

Prices have begun to fall for some goods and services, including commodities, freight shipping and housing. Those declines have led some Fed watchers to warn that the central bank risks tightening financial conditions too much.

“Leading indicators of inflation and macroeconomic forces strongly point to lower inflation ahead,” said David Kelly, chief global strategist at J.P. Morgan Asset Management. “They could inflict an unnecessary recession on American families, while doing little to improve productivity or living standards.”

Fed officials this week said they remain committed to raising rates, at least through early next year.

“Monetary policy will be restrictive for some time to ensure that inflation moves back” to the central bank’s 2% target, Fed Vice Chairwoman

Lael Brainard

said Monday. “It will take time for the cumulative effect of tighter monetary policy to work through the economy and to bring inflation down,” she said.

The Fed has raised the benchmark federal-funds rate at its last three meetings by 0.75 percentage point, most recently last month to a range between 3% and 3.25%. Officials have indicated they are prepared to raise rates over the course of their final two gatherings this year to around 4.25%.

Some economists say the impacts of interest-rate increases can take time to show up in the economy, a dynamic that the Fed should take into account when making decisions. Wholesale prices of used cars have been dropping in recent months, for example, but that shift isn’t yet fully reflected in government figures. Calculations for housing prices and residential rents can also lag.

Coming earnings reports from big banks, including

JPMorgan Chase

& Co. and

Citigroup Inc.,

and consumer-facing companies such as

PepsiCo Inc.,

Delta Air Lines Inc.

and

Walgreens Boots Alliance Inc.

could include more insight into how monetary policy is affecting the economy.

Companies are trying to manage higher costs without alienating consumers who are weary of price increases. Some firms also are contending with the negative effects of a surging dollar on revenue generated in other countries.

Write to Gabriel T. Rubin at [email protected]