Data released on Wednesday showed a larger-than-expected monthly increase in the US Producer Price Index of 0.4% versus 0.2%; the annual rate slowed down from 8.7% to 8.5%. According to analysts at Wells Fargo, the reading offers the latest evidence that inflation pressures are subsiding but they warn there remains significant ground to cover in returning inflation to normal levels. 

Key Quotes: 

“The September Producer Price Index (PPI) offers the latest evidence that inflation pressures are subsiding, but that there remains significant ground to cover in returning inflation to a more palatable level, and that the path will bear some curves. The PPI for final demand rose 0.4% in September to break back-to-back declines in July and August. Our preferred measure of core PPI, which excludes food, energy and trade services, also rose 0.4%, which was the largest monthly gain since May.”

“September's unexpected strength can be traced to a 0.6% increase in core services. However, the prospect for disinflation in the goods sector remains intact. Transportation and warehousing costs fell for a third consecutive month, trade services margins were little changed and intermediate costs continue to trend lower.”