September Inflation: Consumer Prices Up 3.7%, Wholesale Prices Up 6.3%

Prices kept climbing in September, and the increase was steepest further up the supply chain. The Bureau of Labor Statistics reported on October 14 that the Consumer Price Index rose 3.7% over the past 12 months, and a day later said its Producer Price Index for final demand was up 6.3% year over year. With the Federal Reserve’s next policy meeting set for October 27–28, the two reports frame the cost picture small businesses face heading into the holiday season.

What happened

Consumer prices. The CPI for all urban consumers rose 0.6% in September on a seasonally adjusted basis and 3.7% from a year earlier, according to the BLS. Energy did most of the work: the energy index climbed 5.2% in the month and 20.4% over 12 months, with gasoline up 9.1% in September alone and 34.2% from a year ago.

Outside of energy, the picture was calmer. Core CPI, which excludes food and energy, rose 0.3% for the month and 2.6% over the year. Food prices were unchanged in September, and food at home slipped 0.1%. Shelter costs rose 0.4% for the month and 3.2% over the year.

Wholesale prices. Producer prices moved much faster. The BLS said final-demand PPI jumped 1.3% in September, with goods up 2.6% and services up 0.8%. Final-demand energy rose 10.8% in the month. A narrower core measure that strips out foods, energy and trade services rose 0.5% in September and 5.0% over 12 months.

Spending held up. Shoppers kept spending despite higher prices. The Census Bureau’s advance estimate put September retail and food services sales at $745.0 billion, up 0.8% from August, after a revised 1.3% gain the month before. Those figures are not adjusted for inflation, so part of the increase reflects higher prices rather than more goods sold.

The Fed’s stance. At its September 15–16 meeting, the Federal Open Market Committee raised its benchmark rate by a quarter point to a range of 3.75% to 4%, saying in its statement that “inflation remains elevated.” The October CPI report is scheduled for November 10.

Why it matters for small businesses

• Input costs may keep rising. Producer prices often show up in what small businesses pay suppliers before they reach shelf prices. A 6.3% annual rise in wholesale prices points to pressure on materials, packaging, shipping and anything tied to fuel.
• Margins can get squeezed. Consumer prices are rising more slowly than wholesale prices, so many sellers may not be able to pass on the full increase without losing customers.
• Shipping and travel costs. Gasoline is up more than a third from a year ago, which affects delivery fees, carrier surcharges and the cost of driving for work.
• Borrowing costs. The Fed raised rates in September. Business credit cards, lines of credit and variable-rate loans generally track the Fed’s moves, so financing inventory for the holidays may cost more.
• Demand is holding, for now. Solid retail sales suggest customers are still spending, which gives sellers some room to adjust prices thoughtfully rather than slash them.

What you can do now

1. Re-price your top sellers. Update material, packaging and shipping costs for your 5–10 best products and check that each still hits your target margin.
2. Check supplier and carrier rates. Look for fuel surcharges or announced price changes before you lock in holiday inventory.
3. Watch your cash cushion. If you buy inventory early, map out when that cash comes back. Our guide to small business bookkeeping shows how to keep the numbers current.
4. Track business mileage closely. With gas prices this high, an accurate driving log makes the deduction easier to support at tax time.
5. Revisit your tax payments. Higher prices can change your income and expenses. See our guide to quarterly estimated taxes before the January payment.

This brief is general information, not financial or tax advice.