Wholesale prices increased less than expected in October, but inflation pressures persisted and the Federal Reserve is likely still on target for an interest rate increase soon.
The producer price index, which measures the prices domestic producers get for their products before they reach the consumer, rose a seasonally adjusted 0.3% for the month, against the Dow Jones consensus for a 0.4% increase, the Bureau of Labor Statistics reported Friday.
Stripping out food and energy, core PPI posted a 0.3% gain, meeting expectations.
On an annual basis, headline PPI accelerated 6.5%, up 0.2 percentage point for the highest annual rate since November 2022.
The report comes just a few weeks ahead of the Federal Reserve's next policy meeting, Dec. 8-9. Markets are fully pricing in a quarter percentage point increase in the central bank's key overnight borrowing rate, with slight odds that the Federal Open Market Committee might opt for a half-point hike.
Stock market futures added to gains following the release while Treasury yields were mixed.
Earlier this week, the BLS reported that inflation at the cash register was hotter than expected.
The headline consumer price index saw a 0.4% increase in October while core was up 0.3%, both 0.1 percentage point higher than expected. Because of the government shutdown in October 2025, the BLS couldn't collect some data and refrained from putting out a 12-month inflation figure for CPI.
However, the figures showed that the Fed remains a good distance from its 2% inflation goal.
"Today's PPI data – which shows some signs of improving, albeit still too-high – is unlikely to change the Fed's approach in December because the CPI data was already outside their comfort zone," said Chris Zaccarelli, chief investment officer for Northlight Asset Management.
Moreover, policymakers are beginning to worry that inflation generated by the Iran war and higher fuel prices, along with President Donald Trump's tariffs, are beginning to spread through the economy. The Fed generally would look through such price pressures as temporary, but the breadth of inflation could indicate that inflation is becoming more entrenched.
"We've had some signs of trouble now for several months in a row," Chicago Fed President Austan Goolsbee said in a CNBC interview Friday. "If you look at how broad-based the inflation is, it's not just that we're above the target and have been for some time. It's that in categories that are not driven by oil prices and not driven by tariffs, you're still seeing stalled progress and in some cases going the wrong way."
Stripping out food, energy and trade services, PPI saw an increase of 0.5% in October.
Goods prices increased 0.5% in October, with more than 60% of that move driven by goods excluding food and energy, which actually saw a 0.1% decrease. On an annual basis, the goods index jumped 10.2%, the biggest 12-month surge since October 2022.
Final demand services prices increased 0.2%, most of which was linked to transportation and warehousing services, and within that category a 3.9% gain in truck transportation of freight.
"We've been above 2% for almost six years, and while it sometimes we were making progress, lately we're not making any progress, and if anything, it's going the wrong way," Goolsbee said. "Inflation is rising; it's proved far more persistent than we predicted at the beginning from the supply shocks."
Other items in the PPI report also showed multiyear gains. Prices for intermediate processed goods soared 14.6% from October 2025, the biggest annual gain since July 2022. Intermediate prices for services posted a 6.9% increase, the most since November 2022.