US Producer Prices Up Most Since 2022 as Energy Pain Worsens
The producer price index advanced 1.3% from a month earlier — the most since March 2022 — and 6.3% from a year earlier, according to Bureau of Labor Statistics data out Thursday. Excluding food and energy, the gauge was up 0.7% last month and 5% from a year ago. Both came in above all estimates in a Bloomberg survey. (…)
Some economists nudged up their estimates for the core PCE deflator after the release, predicting it would rise either 0.3% or 0.4%. The Bureau of Economic Analysis is scheduled to release September PCE price data, along with income and spending figures, on Oct. 29. (…)
Goldman Sachs, which closely tracks inflation, had September core PPI up 0.2%. It was +0.7%!
GS now sees core PCE prices up 0.34% in September, up from +0.20% before Tuesday’s CPI release. That would be +4.2% annualized, in sync with the CPI measure.
Ed Yardeni shows the relationship between PPI and consumer inflation.
Core inflation measures:
How long can we have producer prices up 6%+ with consumer prices up only 3%+ and rising corporate profit margins? Something’s gotta give.
Meanwhile
Retailer sales sales rose by 0.8% MoM last month, slowing from the upwardly revised +1.3% (was +1.2%) recorded in August. On a YoY basis, retail sales grew +6.3% in September after +5.6% in August.
But core sales (ex-autos, food & gas) were flat MoM in September after jumping +1.2% in August. Core sales were up 5.5% YoY in September.
On a YoY basis, total sales remain solid in spite of accelerating inflation:
My proxy for retail inflation (.35x CPI-Durables + .65x CPI-Nondurables) is up 4.3% YoY in September vs +3.6% in the previous 2 months. Americans’ willingness to consume against sharply rising costs is remarkable. But how sustainable when labor income growth is in the low 3s.
Warsh Boosts Market Expectations of Fed Rate Hold in October
“We made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago.”
Investors pared their bets for a rate hike at the central bank’s Oct. 27-28 policy gathering. The odds, which were hovering around 27% before Warsh spoke, dropped below 15% following his remarks.
Does this (Warsh statement) make sense with that (October hold)?
Data dependent Fed?
The energy shock is starting to spill across the US economy as businesses pass along rising costs, complicating the Federal Reserve’s task of stabilizing inflation.
Two reports this week showed sharp price increases last month in categories including airfares, delivery services and trucking as wars overseas pushed oil prices higher. The grocery aisle has so far largely been spared, but economists see upside risks to food prices down the line as well.
“Every category of business inflation was hot, even excluding energy. It’s inevitable that businesses will pass some of these costs along to consumers in the months to come,” Heather Long, chief economist at Navy Federal Credit Union, said Thursday in a note. (…)
BLS data on producer prices showed an index for truck transportation of freight soared more than 19% from a year earlier in September, the most in more than four years.
And the Fed’s Beige Book report of anecdotes from the central bank’s business contacts, published Wednesday, reinforced the theme.
“Higher oil prices permeated all district reports,” the Beige Book said. “Firms reported elevated diesel prices and noted that fuel surcharges were passing on increased costs throughout the supply chain.” (…)
“If you look at the food category within the CPI, if anything, it’s been rising at a below-trend pace in recent months,” said Stephen Stanley, chief economist at Santander US Capital Markets. “It hasn’t been as quick as I imagined, but I think it’s still coming. I think it is a shoe that has yet to drop, but will at some point.” (…)
“There’s really not obvious evidence that energy is broadly pushing up goods prices,” said Veronica Clark, an economist at Citigroup Inc. Other forces, such as AI-related demand, have been more apparent in the inflation data.
Even so, Citi expects the next couple CPI reports to show fairly benign month-over-month readings. Alongside muted wage growth and a cooler labor market, that should encourage the Fed to look through the latest energy-price surge, Clark said. (…)
But there’s no food inflation in the pipeline just yet:
Unlike in this one:
US Steel Prices Climb to Four-Year High as Trump’s Tariffs Bite
US steel prices climbed to the highest in more than four years as President Donald Trump’s tariffs restrict foreign supplies, boosting domestic producers while raising costs for American manufacturers.
Pricing for hot-rolled coil, a widely used form of steel that serves as a US benchmark, has been on a steady upward trajectory for the past year, rising 52% to $1,255 per short ton, according to Fasmarkets. The last time prices touched that level was May 2022. (…)
What’s proven to be a boon for domestic mills and steelworkers has been a burden for manufacturers, builders and data-center developers. (…)
The US is a net importer of steel but deliveries of overseas supplies have declined sharply this year. Imports of finished steel tumbled 14% to around 13 million tons during the first nine months of 2026, according to the American Iron and Steel Institute. (…)
Domestic supplies are expected to tighten heading into the end of the year as mills curb activity to perform routine maintenance. More than 1 million tons of production is forecast to be affected in the September-December period, according to Fastmarkets.
Steel buyers should expect prices to continue ticking higher, according to Richard Bourke, a senior analyst at Bloomberg Intelligence. Ferrous scrap costs, a key steel input, already are climbing, which is earlier than usual heading into the final months of the year, he added. (…)
American hot-rolled coil is typically the most expensive globally and the premium relative to international markets is widening. Prices are now about two-thirds higher than in Europe and nearly three times those in China, which continues to export near-record quantities of steel despite pushback from trading partners. (…)
BTW, yesterday Alcoa reported revenues up 24% on a 5% decline in shipments. All pricing.
Taiwan to Curb AI Chip Exports to China as Part of US Trade Deal
Taiwan is preparing to tighten export controls on AI chips to further align with US restrictions, according to a senior official in Taipei, joining a Trump administration clampdown on the smuggling of cutting-edge semiconductors to China.
Taipei plans to add artificial intelligence servers and cutting-edge semiconductors to a list of controlled items, Taiwan’s Minister of Economic Affairs Kung Ming-hsin told Bloomberg News. After the measures take effect, he said, shipping restricted AI hardware to China will become a criminal offense under the Foreign Trade Act. (…)
Once the new measures are in place, the controls would be among the strictest measures from President Lai Ching-te’s administration to safeguard Taiwan’s technological and national security interests, as Taipei tests its comfort levels with more assertive policies — and manages pressure from American officials on multiple fronts. (…)
China proposed adding advanced artificial intelligence technologies to its export-control list, potentially restricting overseas transfers of AI models and chip designs in an effort to keep closer control over homegrown advancements in a strategically important sector.
The draft proposal covers 23 AI technologies, including large language models, agents, chip designs and computing clusters. Restricted technologies would include model weights and source code for products exceeding certain performance thresholds.
Chinese AI startups have this summer made significant progress in closing the gap on US industry leaders. Models like Moonshot AI’s Kimi K3 and DeepSeek’s latest editions offer better pricing and Chinese companies also favor the approach of sharing the weights — used to steer an AI system toward finding an answer — of their models to encourage developers to build on top of them. They’re also increasingly looking for markets beyond China, with the likes of Z.AI Co. making their wares available on US cloud service providers like Amazon Web Services.
The proposed export curbs are aimed at ensuring “the safety and controllability” of AI technology, a spokesperson for the Commerce Ministry said, citing the risk of misuse for attacking critical infrastructure, defense industries and core government systems by non-state actors or malicious entities. (…)
The proposal would restrict exports of core technology for models containing at least 2 trillion parameters — like Kimi K3 or Alibaba Group Holding Ltd.’s Qwen3.8-Max — or ranking among the world’s top 10 on measures including performance, usage and safety. The curb would cover model weights, checkpoints, source code and architecture. (…)
AI models trained on China’s “core data,”as defined by relevant legislation such as the Data Security Law, will be banned from export, according to the proposal. The Data Security Law describes state core data as “data concerning national security, the lifeline of the national economy, key public livelihoods, and major public interests.”
Open-source technology and research already in the public domain wouldn’t be covered, and the government will provide streamlined procedures, such as automatic licensing, to exports involving open-source AI technologies. Beijing said the measures weren’t aimed at any particular country, region or entity. (…)
China will restrict exports of several solar technologies, as Beijing seeks to maintain its technological edge in renewable energy while countries including the US and India ramp up domestic manufacturing.
The country will add 12 solar-related technologies and core equipment to a list of items subject to export controls, the Ministry of Commerce said in a statement on Friday, which cited the need to safeguard national security and interests. The measures are part of a broader revision targeting 40 key technologies, including those related to artificial intelligence and biopharmaceuticals.
The new rules include a ban on exports of production technology for perovskite and tandem solar modules. The emerging technology is more efficient and can be used in space-based solar. Some technologies used in the production of polysilicon, a key raw material for the solar industry, will also face export restrictions.
“In recent years, the application of solar technology in sensitive fields such as aerospace, national defense, unmanned equipment, and high-security-level infrastructure has been continuously expanding,” the ministry said in the statement. “The national security risks that may be caused by the export of solar technology have been constantly rising. It is necessary to implement timely and appropriate supervision.” (…)
Solar firms in those countries [US and India] continue to depend on China for some key materials, equipment and technologies, according to BloombergNEF.
The Chinese government said the latest measures were made after consultation with the industry and cover only a small number of technologies. The country will continue to support international exchanges and cooperation on green technologies, the ministry said.
China is looking to tighten biotechnology exports, but will leave the door open for licensing deals with foreign drugmakers that have underpinned its position as a growing pharmaceutical powerhouse.
Beijing is proposing to add five biomedical technologies to its export-control list, according to a statement from the Ministry of Commerce. The draft proposal, released Friday, includes two types of cutting-edge medical technology platforms to treat diseases at a genetic level. But the list clarifies that restrictions don’t apply to licensing, partnerships and contract research services involving these technologies.
Multinational pharmaceutical companies like AstraZeneca Plc and Pfizer Inc have entered into more global licensing deals for experimental drugs developed by Chinese companies. There were 81 licensing deals worth up to $110 billion in the first half of 2026 — on track to surpass last year’s record, according to government statistics.
Allowing licensing deals will provide some relief for the pharmaceutical industry globally. US and European firms say China’s deep pipeline of drug candidates means more innovative drugs with big sales potential. For Chinese drugmakers, the deals offer cash and international recognition — crucial to China’s goal of becoming a global leader in biomedical research.
“The controls represent a new ‘coming out’ moment for China’s confidence in how innovative and globally competitive its biomedicine sector has become,” said Ryan Etzcorn, a senior director at Ankura China Advisors. “Chinese biotech will be open for business, but closed to technology flight.” (…)
The US Treasury Department is expected to release new regulations this year that could subject biotech licensing deals to the same outbound investment reviews as semiconductors and artificial intelligence systems. (…)
Lutnick Throws the Future of U.S.-Mexico Trade Talks Into Further Doubt
What a mess!
Progress toward a U.S.-Mexico tariff deal has stalled after opposition from Commerce Secretary Howard Lutnick, people familiar with the talks said, the second time that he has had a hand in upending advanced negotiations with a North American partner. (…)
Lutnick has opposed significant reductions in the 25% tariff on Mexican automobiles and the 50% levies on steel and aluminum, the people said. Also on metals, he has objected to reductions in tariffs on so-called derivative products—finished products made of steel and aluminum. Domestic aluminum companies have told the administration that any reduction in these levies would undermine U.S.-based firms and cost American jobs. (…)
Lutnick’s position on the tariffs is a significant obstacle to a deal after months of negotiations led by U.S. Trade Representative Jamieson Greer, the people familiar with the talks said. Mexico and Canada are America’s two largest national trading partners and are the top buyers of U.S. goods. (…)
A senior Mexican official said that every time both sides get close to a deal, the Trump administration brings up something else that it wants. (…)
The continuing difficulties in U.S. talks with Mexico recall a similar falling out with Canadian officials. In late August, the U.S. and Canada walked away from the negotiating table after Lutnick objected to proposed tariff reductions on steel, aluminum and autos. (…)
In recent talks between the U.S. and Mexico, major automotive firms in both the U.S. and Mexico have complained about the byzantine process that Lutnick has imposed on vehicles crossing the American border from Mexico and Canada.
U.S. tariffs on Mexican automobiles stand at 25%, but companies can earn rebates from the levies based on the value of U.S.-made car components. Claiming those refunds requires extensive paperwork and approval from the Commerce Department, which can deny the requests.
Tariffs on Japanese and South Korean automobiles stand at 15% under the terms of trade deals that Luntick helped shape last year. The difference in tariff rates, along with the extensive red tape involved in tracing U.S.-made components, has led some firms to shift production from North America to Asia, representatives from automakers told the negotiators. Overseas, the firms can source metals and components from China and other low-cost economies without the sourcing rules in USMCA or the difficulties of the refund process. (…)
Another mess:
Ukraine Faces New World in Which Europe Is Its Only True Ally
In the span of a week, Trump has trashed years of energy sanctions on the Kremlin, pressured Kyiv to quit bombing Russian oil refineries and suggested Ukraine’s Volodymyr Zelenskyy was an illegitimate president — echoing Moscow’s propaganda. At one point, Ukraine also lost full access to the Elon Musk-owned Starlink system, leaving it hobbled on the battlefield. (…)
“The western alliance is in a weaker position now than it was a few days ago,” Danish Prime Minister Mette Frederiksen told reporters as she arrived for talks in the Belgian capital on Thursday. “If you do not support Ukraine, then you put Europe as a whole, and in my view therefore also NATO as a whole, in a much, much more dangerous situation.” (…)
AI-fabricated video clips of well-known actors and musicians — including Robert De Niro, Julia Roberts and Cher — attacking Democrats began appearing on X in early September, some urging people to join a campaign dubbed #AllDemocratsAreCriminals. Scores of other clips have made false allegations of corruption and improprieties by Democratic candidates.
Social media researchers have attributed the posts to a Russian state-backed operation known as Matryoshka, or Operation Overload, which floods social media with clips purportedly from established media outlets. (…)
The Matryoshka videos appear to get tens or hundreds of thousands of views on X. (…)
Russia has used social media to influence US elections since 2016, when it sought to undermine confidence in the voting process and damage Hillary Clinton’s presidential campaign, according to US intelligence assessments. But its tactics have evolved over the past decade, from exploiting divisions across the political spectrum to focusing solely on attacking Democrats, who have been more supportive of Ukraine than Republicans.
Unlike previous elections, when it focused on presidential campaigns, Russia is trying to spread false stories about Democrats in numerous races nationwide, including 29 of the 36 running for governor and 20 of the 35 vying for Senate, according to Bloomberg’s review. (…)
While Matryoshka also plants stories on other platforms such as BlueSky and TikTok, it most frequently posts on X, according to Antibot4Navalny. (…)
While most Matryoshka posts have failed to gain real traction, a few have broken through. The Institute for Strategic Dialogue, a London-based research organization that examined 135 pieces of content on social media between January and March 2025 that it attributed to Matryoshka, found one that garnered 4 million views: a video made to look like it was from E! News that falsely claimed the US Agency for International Development paid celebrities to travel to Ukraine. Musk and Donald Trump Jr. each reposted the clip. (…)
One, posted on Sept. 22, falsely said the New York Times revealed that Taylor Swift accepted $500 million to support the Democratic Party and gender transition in exchange for a series of concerts before the November election. It was published alongside a similar and also false story about singer Billie Eilish. The post got 75,600 views within 30 minutes of being uploaded and then quickly tailed off, according to snapshots archived by Antibot4Navalny. (…)
Elon Musk gave $158 million to the GOP’s main super PAC backing Senate candidates in September, making the world’s richest person the biggest US political donor for the second straight election cycle, according to the latest filings from the Federal Election Commission.
The donations appear to be earmarked for the Texas Senate race, normally a relatively safe seat for Republicans that’s turned into one of the most expensive in history.
Musk has now given more than $330 million in the current election cycle, putting him well ahead of other major political donors including hedge fund manager George Soros, a perennial top contributor to Democrats, and Republican backers like quant trader Jeffrey Yass and Uline co-founder Richard Uihlein. (…)
Musk’s donations widen the big financial advantage the GOP already enjoys over Democrats. Trump, the Republican Party and its congressional super PACs amassed $1.1 billion through the end of the second quarter, triple the $355 million that Democrats’ corresponding committees have on hand. The cash advantage is one bright spot in a difficult electoral environment for the GOP. (…)
The other mess:
President Donald Trump declined to rule out using a weapon known as the “Mother of all Bombs” on Iran after the US midterm elections.
“Well the mother of all bombs is not nuclear,” Trump said in an interview with Newsmax broadcast on Thursday night. “It’s not nuclear at all, just an extremely large bomb. It’s like a tiny nuclear bomb. But the mother of all bombs is one big bomb, but it’s not nuclear,” Trump said.
“I wouldn’t use nuclear. We don’t have to,” he said.
CNN reported earlier this week that the US has developed strike plans that could include using the GBU-43/B Massive Ordnance Air Blast Bomb, or MOAB, citing multiple officials familiar with the matter. In 2017, during the first Trump administration, the weapon was dropped on Islamic State positions in Afghanistan.
The MOAB is a thermobaric weapon, also known as a “vacuum bomb,” that sucks all the oxygen out of the surrounding air to set off the blast. This force can rupture lungs. (…)
At the same time, Trump maintained that the US didn’t plan to deploy troops in Iran. “No, I don’t see that,” he said.
“The Iran war will be over very soon,” Trump reiterated. “It’s going to end very soon, one way or the other. It’s going to end.”
