WASHINGTON (AP) — Rising energy costs led prices at the wholesale level to climb 0.4 percent in September — a bout of inflation that happened in the wake of Hurricane Harvey closing a critical number of U.S. gasoline producers.
The Labor Department said Thursday that its producer price index, which measures inflation pressures before they reach the consumer, has risen 2.6 percent over the past 12 months. September's burst of inflation is likely the result of oil refineries shuttering along the Gulf of Mexico due to Hurricane Harvey toward the end of August. As a result, gasoline prices surged 10.9 percent in September.
The sharp increase in producer prices is occurring after years of subdued inflation. The Federal Reserve targets a 2 percent yearly increase in consumer prices in order to encourage economic activity, but the U.S. central bank has persistently missed that target for the past five years. The Fed's preferred measure of inflation has increased just 1.4 percent over the 12 months ended in August.
For producers, food costs were unchanged last month. Motor vehicle costs rose, while computer chips fell in price.
A less volatile measure of inflation, which excludes food, energy and trade services, rose 0.2 percent last month. That measure has increased 2.1 percent over the past year.
The Fed carefully watches inflation to determine whether to raise a key short-term interest rate. That rate can influence the supply of money in the U.S. economy.
So far this year, the Fed has raised the rate in March and June from relatively low levels. Many investors and analysts expect a third rate hike this year when Fed officials meet in December, despite signs that any uptick in inflation last month are unlikely to be sustained as refineries come back on line.