Editor’s note: This article was updated to add more details and context.
U.S. producer prices rose 5.4% year-over-year in August, versus the 5.3% rate economists expected and accelerating from July’s 4.8% reading, according to Labor Department data released Thursday.
On a monthly basis, the headline producer price index (PPI) accelerated from July’s 0.1% to 0.4%, against a 0.3% consensus.
Core PPI, which strips out food and energy, rose 0.2% on the month against 0.3% expected, lifting the annual rate to 4.6% from 4.3%.
PPI excluding food, energy and trade services came in at 0.3% month-over-month and 4.7% year-over-year, from 0.4% and 4.7% previously.
Prior to the PPI report, Fed futures had priced a 62% chance of a rate hike at the Fed’s next week meeting.
Diesel Prices Skyrocketed
Final demand goods prices advanced 1.1% in August after two consecutive declines, and more than three-quarters of that broad-based rise traced to final demand energy, which jumped 4.2%.
Over a third of the entire goods increase came from a single line item: diesel fuel, up 24.1% on the month.
Final demand services edged up just 0.1%, and the composition matters. Transportation and warehousing prices rose 2.3%, itself a fuel-cost story, with truck freight up 2.0%, while trade services margins fell 0.2%.
The cleanest read on underlying services inflation – final demand services less trade, transportation and warehousing – was unchanged in August. Portfolio management prices, which feed directly into the Fed’s preferred PCE gauge, moved lower.
Market Reaction: Stocks Slide, Dollar Firms, Oil Tops $100
Equities extended losses in the minutes after the release. By 8:39 a.m. ET, the S&P 500 was down 0.5% at 7,611, the Nasdaq 100 fell 0.8% to 29,080, the Dow slipped 0.5% to 52,294 and the Russell 2000 lost 0.6% to 2,904.
The two-year Treasury yield – the maturity most sensitive to Fed policy – spiked roughly 5 basis points to 4.50%, its sharpest move of the session.
The U.S. dollar index climbed 0.3% to 98.91.
Gold took the worst of it, sliding 1.1% to $4,340 an ounce as the combination of a firmer dollar and higher front-end yields squeezed the trade from both sides.
WTI crude, meanwhile, pushed above $100 a barrel up 3.2% at $100.60.
Past performance is not indicative of future returns.
What It Means for Next Week’s Fed Decision
The PPI print gives the hawkish camp fresh ammunition.
Market-implied probability of a 25-basis-point rate hike next week climbed to 66% after the hotter-than-expected producer inflation report.
Polymarket currently assigns a 54% chance of a rate hike.
On Friday, the Bureau of Labor Statistics will release the Consumer Price Index for August. Economists expect inflation to stay unchanged at 3.4% year-over-year, remaining above the target.
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Originally Posted September 10, 2026 – Producer Inflation Jumps to 5.4%, Fuels Fed Hike Bets (UPDATED)
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