US producer prices climb 6.3% in September, beating 5.3% forecast

• The previous headline reading had been 5.4%.
• Final demand PPI on the month is being measured against +0.5% expected.
• The prior monthly gain was +0.4%.
• Year over year, the ex-food and energy measure is compared with +4.4% expected.
• That reading was 4.6% y/y last time.
• Month over month, ex-food and energy is against an expected +0.3%.
• The previous month-over-month ex-food and energy figure was +0.2%.
• For ex-food, energy and trade, the annual figure is being measured against +4.7% prior.
• The month-over-month ex-food, energy and trade reading is against +0.3% prior.

Each month, the US Bureau of Labor Statistics releases the Producer Price Index, which measures how the selling prices received by domestic producers move on average. The CPI follows inflation from the consumer's side of the till, while the PPI takes the seller's angle, recording wholesale and business prices before those costs reach households.

The headline number is the final demand index, introduced by BLS in 2014 as the successor to the older finished goods measure. The index spans goods, services and construction sold for personal consumption, capital investment, government and export. Services account for roughly two-thirds of the index, so the PPI is much more than a factory-gate indicator.

Sharp month-to-month swings in food and energy prices are the reason markets keep their focus on core readings. One of those core readings leaves out food and energy. A tighter ex-food, energy and trade measure goes further and also excludes trade services. Trade services follow the movement of retailer and wholesaler margins, numbers that can be unstable and are not always a good sign of fundamental cost pressures.

The PPI has long been treated as a pipeline gauge, on the premise that cost increases at the producer level eventually reach consumers. In today's markets, the report's main influence comes from the help it offers in forecasting the Fed's favored inflation measure, the core PCE price index. Some PPI inputs flow straight into PCE, such as portfolio management fees, airfares, and physician and hospital services. Before core PCE is published, economists use the CPI and PPI together to estimate it, so an unexpected result in those PPI categories can alter Fed pricing even if the overall number looks mild.