Inflation hitting businesses reached 6.3% year-over-year in September, marking the worst price increases companies have faced since December 2022, according to data from the Bureau of Labor Statistics. The Producer Price Index, which tracks prices businesses charge each other, has been climbing in a zigzag pattern since mid-2023, even as the Federal Reserve cut policy rates while focusing on consumer inflation. This business-facing inflation far outpaces the 3.7% consumer price inflation reported for the same period.
The month-to-month spike was even more dramatic, with the overall PPI jumping 1.3% from August to September, equivalent to a 17.4% annualized rate. Energy costs surged 10.8% in a single month and 35.6% year-over-year, with September's price level exceeding the June 2022 peak. Services drove much of the acceleration, rising 0.82% month-to-month and 4.9% year-over-year, the worst annual rate since December 2022. Transportation and warehousing prices exploded by 2.2% in September alone—a 29.3% annualized pace—and climbed 12.4% year-over-year, the steepest increase since October 2022. Trade services jumped 1.38% month-to-month, while core goods inflation excluding energy and food held at 5.1% annually for the fifth consecutive month, the highest stretch since February 2023. Food costs for businesses spiked 1.2% in September after two months of declines, though prices remained flat year-over-year.
The analysis notes that core PPI, which strips out energy and food, accelerated to 5.0% year-over-year, the worst reading since January 2023. The report emphasizes that services account for 68% of the overall PPI final demand, meaning they "move the needle" on business inflation. Transportation and warehousing costs were driven higher by elevated input expenses, including spiking diesel prices, while trade services rebounded sharply after a weak August and negative July reading.
The surge in business inflation carries broader economic implications. The report explains that GDP measures inflation facing all economic participants—consumers, businesses, nonprofits, and governments—and the combined readings from the PPI and CPI indicate that inflation across the entire economy in the third quarter "was ugly." Higher diesel and energy costs ripple through supply chains, pushing up transportation expenses that businesses must absorb or pass along. Food inflation illustrates the compounding effect: after soaring roughly 31% from mid-2020 through 2022, prices fell briefly in 2023 but have been climbing again since early 2024, meaning businesses now face "even higher price levels" on top of already elevated costs.
The report indicates that the full picture of third-quarter economic inflation will emerge when GDP data is released at month's end. With business inflation accelerating in its zigzag manner since mid-2023 while the Fed has been cutting rates based on consumer price trends, the disconnect suggests policy adjustments may not align with the inflationary pressures companies actually face. The bottom line: businesses are paying significantly more for energy, transportation, and services than a year ago, and those costs are climbing faster than what consumers see at checkout.