Wholesale inflation rose 0.5% in September, more than expected

A measure of wholesale prices rose more than expected in September, indicating simmering inflation pressures for the U.S. economy.

The producer price index, which measures costs for finished goods that producers pay, increased 0.5% for the month, against the Dow Jones estimate for a 0.3% rise, the Labor Department reported Wednesday. That was less than the 0.7% increase in August.

Excluding food and energy, core PPI was up 0.3%, versus the forecast for 0.2%. Excluding food, energy and trade services, the index rose 0.2%, in line with the estimate.

Inflation pressures came primarily from final demand goods, which surged 0.9% on the month, while services increased 0.3%.

On a year-over-year basis, headline PPI increased 2.2%, the largest move since April.

Markets look at the PPI as a leading indicator for inflation, as it gauges a wide variety of costs for pipeline goods that feed to consumer products. On Thursday, the Labor Department will release its more closely watched consumer price index, which is expected to show a slight easing in the pace of inflation.

Both reports feed into policy decisions from the Federal Reserve, which has been raising interest rates aggressively in an effort to stem inflation.

In recent days, central bank officials have indicated that they may not need to enact additional hikes as Treasury yields have risen sharply on their own, tightening financial conditions. That in turn has helped assuage market fears, leading stocks higher this week.

Markets showed only a mild reaction to the PPI release, with stock futures off slightly and Treasury yields off their lows though still negative on most longer-duration issues.

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