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September PPI Surges 1.3% to a 6.3% Annual Rate as Retail Sales Beat

Producer prices rose at their fastest monthly pace since March 2022, a day after a hot CPI report. Retail sales beat too, but mostly because gasoline cost more. Here is what the data showed and what it means for the Fed's October 27-28 meeting.

MarketsBy · Markets EditorUpdated 4 min read

Inflation at the wholesale level came in far hotter than expected. The Bureau of Labor Statistics reported on Thursday, October 15, 2026, that the producer price index for final demand rose 1.3% in September and 6.3% from a year earlier. Coming one day after a hotter-than-expected consumer price index, it is the second straight inflation surprise heading into the Federal Reserve's October 27-28 meeting.

Forecasts had called for a much smaller rise. MT Newswires cited a Bloomberg survey expecting 0.6% on the month, Benzinga cited 0.5%, and Finwire put the LSEG consensus for the annual rate at 5.3%. August's annual rate was revised up to 5.6% from 5.4%.

What drove the PPI surge

Energy did most of the work. Energy prices for producers jumped 10.8% in the month and food prices rose 1.2%, per MT Newswires. The Fly called the 1.3% monthly gain the sharpest since March 2022 and the second-highest on record, and linked it to the global energy shock from the war in the Middle East and tight diesel markets amid outages at Russian refineries. CNBC said the monthly and annual gains were the largest since March 2022 and December 2022, respectively.

The underlying measures were hot too, and that's the part the Fed can't easily look past. Excluding food and energy, PPI rose 0.7% on the month versus 0.3% expected and 5.0% on the year versus a 4.4% forecast, per Benzinga and Finwire. A narrower gauge that also strips out trade services rose 0.5% on the month and 5.0% on the year, up from 4.8% in August.

Producer prices often feed into what consumers pay later, and they also feed into the Fed's preferred inflation gauge, the PCE price index. A hot PPI right after a hot CPI makes it harder to argue that September was a one-off energy blip. CNBC also pointed to Bespoke Investment Group's finding that Wednesday's Fed Beige Book had the highest count of inflation-related terms on record.

Retail sales: a beat, with a catch

The Commerce Department said retail sales rose 0.8% in September, beating a 0.3% consensus, after an upwardly revised 1.3% jump in August, per MT Newswires and Reuters. Excluding autos, sales rose 0.9% against a 0.5% forecast. Total sales were $745.0 billion, according to Benzinga.

The catch is gasoline. Sales at gas stations rose 6.4%, and stripping out autos and gasoline left sales up just 0.2%. The control group, which feeds into GDP, rose only 0.1% versus 0.3% expected, and August's control-group gain was revised down to 1.2% from 1.4%, Benzinga reported. Retail sales aren't adjusted for inflation, so a lot of September's "growth" is just higher prices.

Reuters added that inflation-adjusted wages fell again in September and that higher-income households, helped by stock-market gains, are doing the heavy lifting. The Fed's Beige Book said most districts saw "little or no change in overall consumer spending" between late August and early October.

Other data were steadier. Initial jobless claims rose to 199,000 for the week ended October 10, just below the 200,000 expected, and continuing claims were 1.71 million, per Benzinga. The Empire State manufacturing index jumped 18 points to 25.5, its highest since December 2021, while the Philadelphia Fed index cooled to 20.9 from 37.8.

How markets and Fed odds reacted

Stocks barely flinched at first. By 8:50 a.m. ET, Nasdaq 100 futures were down 1.22%, S&P 500 futures were off 0.28% near 7,697 and Dow futures were up 0.40% near 51,829, roughly where they sat before the release, Benzinga reported. The 2-year Treasury yield briefly spiked toward 4.79% before easing to 4.76%. The dollar index was flat near 101.79, gold held near $4,150 an ounce, and Bitcoin traded near $80,825. Before the data, TipRanks had Brent crude down 2% at $103.94 a barrel and WTI near $94.97.

Rate-hike pricing is the key variable. The Fed raised rates by a quarter point in September. Before Thursday's data, Reuters cited CME FedWatch at a 27% chance of another hike this month, up from 20% a week earlier, and 67% odds of a December hike. Rabobank noted that after Wednesday's CPI, the overnight index swap curve briefly implied close to a 50% chance of an October hike before settling around 37%.

Fed officials have been leaning hawkish without committing to timing. San Francisco Fed President Mary Daly said "more rate hikes likely, timing still under consideration," FXStreet reported. Not everyone agrees the market has it right: Benzinga said BlackRock views the hike expectations as aggressive and has upgraded short-term Treasuries, arguing that "expectations for further Fed hikes look excessive." Cleveland Fed President Beth Hammack and Fed Chair Kevin Warsh are both scheduled to speak later Thursday.

What this means for traders

Where Loomi fits

Macro mornings like this one can whipsaw the index in the first hour and then reverse by lunch. Loomi's VIX Gate gives a rules-based way to decide when volatility is high enough to cut exposure, and the GEX regime view shows whether dealer hedging is likely to dampen or amplify a rates-driven move. The options scanner flags unusual activity in rate-sensitive names as the data hits, and the Desk pulls it together in one place. None of it predicts the Fed. It helps you react with a plan.

— Rowan Ellery, Markets Editor, Loomi.Ai. Questions or corrections? See our research methodology.

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FAQ

What was the September 2026 PPI reading?

The producer price index for final demand rose 1.3% month over month and 6.3% year over year in September 2026, the largest monthly gain since March 2022. Core PPI excluding food and energy rose 0.7% on the month and 5.0% on the year.

Was September 2026 PPI higher than expected?

Yes, by a wide margin. Forecasts called for about 0.5% to 0.6% monthly and about 5.3% to 5.5% annually. Core PPI was expected to rise 0.3% on the month.

How strong were September 2026 retail sales?

Retail sales rose 0.8% versus 0.3% expected, but much of the gain came from a 6.4% jump at gas stations. Excluding autos and gasoline, sales rose about 0.2%, and the GDP control group rose only 0.1%.

Loomi.Ai provides educational market research, not financial advice. Nothing here is a recommendation to buy or sell any security. Trading stocks, futures and options involves substantial risk of loss. Estimates and schedules cited were current at publication and can change.

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