High transportation costs drive wholesale prices
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The latest producer price data suggests that the inflationary effects of the Iran war may be difficult to unwind.
- Energy prices retreated last month — with diesel prices declining almost 8% — but the costs accumulated in recent months remained prominent across America's supply chain.
Why it matters: Higher fuel costs make it more expensive to transport key goods — including food — across the country, adding to the prices that businesses pay and possibly what consumers ultimately see on store shelves.
By the numbers: The Producer Price Index rose 0.3% in October, a sharp slowdown from September's 1.4% surge. Still, over the past year, PPI is up 6.5%, the largest 12-month increase in four years.
- Producer food prices climbed 1.3% in October, with vegetable prices surging 27% (on top of a 31% increase in September).
- Prices for basic organic chemicals — derived from petroleum and natural gas — jumped almost 4% in October alone, suggesting that elevated energy costs are still rippling through manufacturing.
Stunning stat: Truck transportation costs advanced 3.9% in October after a similar increase the prior month.
- Prices are up almost 25% from a year earlier — the largest annual increase since May 2022. That puts the surge in transportation costs on par with the pandemic-era inflationary shock.
- (A regulatory crackdown affecting immigrant truck drivers is also pushing up freight rates.)
What to watch: "Over the past year, what carriers charge to move and store consumer goods has risen nearly four times as fast as retailers' and wholesalers' markups, and those prices rose again in October despite easing energy costs," Richard de Chazal, an analyst at William Blair, wrote in a note.
- "During the 2021-2022 freight spike, merchants raised markups to keep pace. This time they have absorbed much of the increase, leaving more to pass on to consumers if fuel stays high."
