PPI Jumps 1.3% as CPI Hits 3.7% and Diesel Holds at $6.179

This week’s price data shows the inflation is stuck in the middle of the supply chain. Last edition argued that cost pressure had moved off the freight lane and into the bill of materials. The September price reports, released Wednesday and Thursday, show how far it has moved. The Producer Price Index for final demand jumped 1.3%, the biggest monthly increase since March 2022, and is up 6.3% over the year. Further back in the chain the increases are larger: processed goods for intermediate demand are up 14.1% from a year ago and unprocessed goods 21.5%. At the checkout, consumer prices rose 3.7% from a year earlier, up from 3.4%, but core CPI was up only 2.6% and core goods only 0.7%. Gasoline accounted for more than half of September’s CPI increase. Retail sales rose 0.8%, only slightly faster than the 0.6% rise in consumer prices, and just 0.2% excluding gas stations. The Fed’s Beige Book explains the gap: “Consumer-facing firms noted tighter profit margins as price-sensitive customers continue to resist price hikes.” In the New York Fed’s survey, the net share of factories paying higher prices (59.5) is almost twice the net share charging higher prices (30.6). Diesel fell for a third week, to $6.179, but a container ship sank in the Strait of Hormuz on Tuesday. Producers are paying higher costs that shoppers are refusing to absorb. Every contract signed this quarter decides who in the middle of the chain carries that gap.

Retail & Consumer Spotlight: Spending Rose on Gas. Goods Barely Moved.

Last Edition’s Question: Does 77.9 Reach the Shelf?

Last edition called September CPI the first test of whether ISM’s 77.9 prices index would reach consumers. So far it has reached them through fuel and not through goods. BLS reported Wednesday that the all-items index rose 0.6% in September after 0.4% in August, and 3.7% over the year. Energy rose 5.2% in the month, and gasoline 9.1%. Excluding food and energy, prices rose 0.3%, or 2.6% over the year. Core goods rose 0.7% from a year earlier, apparel 3.4% and new vehicles 0.6%. Food was unchanged in September, and food at home fell 0.1%. “This was a disappointing number,” National Economic Council Director Kevin Hassett told Fox Business, according to NBC News.

The PPI report released Thursday shows what is waiting to come through. Final-demand goods prices rose 2.6% in September, which BLS called “the largest increase since data were first calculated in December 2009.” Core producer prices (excluding food, energy and trade services) are up 5.0% from a year ago, nearly twice the 2.6% core CPI rate. That gap is the margin squeeze. Factories, distributors and brands are paying 2026 input prices, while shoppers are paying something closer to 2025 prices for anything that isn’t fuel.

Retail Sales: A Fuel Bill

Census’s advance estimate put September retail and food services sales at $745.0 billion, up 0.8% from August and 6.3% from a year ago, and August was revised up to 1.3%. Gas station sales rose 6.4% in the month and are up 28.1% from a year ago. Excluding gas stations, sales rose only 0.2%, and Census’s 90% confidence interval for that figure includes zero. Clothing was flat, general merchandise fell 0.1% and nonstore rose 0.3%, while restaurants rose 1.1%. Households are paying for gas and meals out, not more goods.

The Grocers and the Banks Disagree

The banks said the consumer is fine. Wells Fargo CEO Charlie Scharf said Tuesday that “Consumers are spending more, loan delinquencies are low, and deposit and investment balances have grown.” Bank of America’s credit and debit card purchase volume rose 8% to $265.7 billion. The Beige Book shows who is doing that spending: “Over half of the Districts noted that consumer spending was driven by high-income households.”

Mass-market grocery shows the other side. Albertsons reported Tuesday that identical sales fell 0.8% and gross margin slipped to 26.8% from 27.0%, citing digital delivery costs and shrink. It withdrew its fiscal 2026 outlook. CEO Susan Morris announced “a comprehensive business review” to “tackle even harder a cost structure we can no longer afford.” Michigan’s preliminary October sentiment, released last Friday, fell to 46.3 from 48.1.

These are the conditions under which suppliers will be asked to fund holiday markdowns. A retailer whose comparable sales are falling while its own costs rise will push those costs onto suppliers through deductions, promotional funding and longer payment terms. Before Q4 trade-terms talks, split your price-increase request into a fuel-linked part and an input-linked part. Retailers can see fuel in the CPI and will accept it. They will reject input costs unless you show the index behind them.

Global Logistics Pulse: Rates Are Easing at the Edges and Rising at the Core

Diesel: Third Decline, Same Risk

DOE’s weekly average for October 12, released Wednesday after the Columbus Day delay, was $6.179 a gallon, down 2.0 cents. It is the third straight decline, but the smallest of the three after drops of 14.7 and 18.3 cents. Diesel is still $2.51, or about 69%, above a year ago. A surcharge table with a $3.50 base at 6 miles per gallon now adds about 44.7 cents a mile, down from 45.0 cents last week. Last edition flagged that EIA’s daily Brent spot assessment had moved far above futures. EIA’s spot table had not updated beyond October 6 by Thursday, so this edition uses futures: ICE Brent settled at $106.06 a barrel on Wednesday, according to Investing.com data, compared with $104.72 on October 9.

Hormuz got worse. gCaptain reports that the Singapore-flagged container ship GFS PRIDE was hit by a projectile in the strait on Tuesday, caught fire and sank, and all 21 crew were evacuated. A second Singapore-registered ship, GFS GISELLE, was hit the next day and reached anchorage. At least six vessels were hit on Sunday, October 11, and traffic remains “substantially below prewar levels” of 130 to 140 transits a day, even as U.S. Central Command said “American forces and regional partners clearly control the Strait of Hormuz.” Leave fuel surcharges floating, and decline any carrier offer to swap the surcharge for a fixed all-in rate at today’s diesel price.

Truckload: Capacity Is the Problem, Not Demand

DAT’s report for October 4 to 10 shows truckload linehaul rates rising even as fuel eases. Dry van all-in spot rose 3 cents to $3.12 a mile, and van linehaul rose 5 cents to $2.26, up 35% from a year earlier. Load posts fell 18% after the quarter-end rush, while truck posts rose 4%, and the van load-to-truck ratio fell to 10.5 from 13.7. Even so, “Load-to-truck ratios remain higher year over year,” said DAT’s Dean Croke; the van ratio a year ago was 6.3. FreightWaves reported national tender rejections near 14% in SONAR data without a surge in demand. “Supply is still not sufficient to cover demand in terms of truckload capacity,” said FreightWaves’ Zach Strickland.

The Cass Freight Index for September shows the effect on shippers’ costs. Shipments rose 1.9% from a year earlier, the second straight annual gain after 42 months of declines, while expenditures rose 20.4%. Cass’s truckload linehaul index rose 10.1% to its highest level in four years, its 21st straight month of year-over-year gains. Cass wrote that “even as spot rates slow with modest sequential declines, the much larger contract market is still adjusting higher.” It expects spending in October to run about 23% above a year earlier. Contract rates are adjusting upward to where spot has been all year. If your 2027 truckload bid is in the field, treat the Cass linehaul index, not the DAT all-in rate, as your opening position. Carriers will quote from linehaul, and linehaul is still rising.

Ocean: The Transpacific Turns, and Tender Season Opens

Last edition advised holding transpacific commitments until early November. The data now favors waiting. Freightos’ October 13 update put Asia–U.S. West Coast down 2%, a move it said “could signal the start of a downward trend with Golden Week behind us.” Drewry’s October 8 index fell 2% to $4,351 per 40-foot container, with Shanghai–Los Angeles down 3% to $7,624 and Shanghai–New York down 2% to $10,220. Drewry counted four transpacific blank sailings for the following week, down from eleven. The cargo has landed: the Port of Los Angeles moved 1,042,652 TEUs in September, the busiest month in its 118-year history, and NRF’s Global Port Tracker forecasts November imports down 11% from October, per Freightos.

Asia–Europe sent mixed signals. Freightos had Asia–Mediterranean up 7% to $3,800, while Drewry’s Shanghai–Genoa held steady at $3,696. Drewry said “The faster-than-expected return to the Suez route remains the biggest threat to carrier efforts to support rates.” Hormuz complicates that. Freightos warned that “the current escalation may increase the likelihood of renewed Red Sea strikes.” Freightos also noted that shippers and carriers are “now entering tendering season for 2027’s annual ocean contracts.” Start the 2027 tender now, but don’t sign a transpacific fixed rate priced off a market that is turning down. On Asia–Europe, write a Red Sea clause into the contract: a defined surcharge triggered by a carrier diversion, so that a renewed diversion doesn’t become a contract reopener.

Parcel: The Fuel Surcharge Is Now Mostly Margin

FreightWaves reported Wednesday that the average parcel fuel surcharge reached 30% of the transportation rate in September, according to the TD Cowen/AFS Freight Index, compared with 7.75% in early 2021. Nearly three-quarters of that increase came from carriers changing their surcharge tables, not from higher pump prices. “Even if crude oil normalizes and fuel prices recede, the effective fuel surcharge will not show a material decrease,” said Mingshu Bates, chief analytics officer and president of parcel at AFS Logistics. FedEx’s 2027 general rate increase averages 5.9% from January 4, and its ground minimum charge rises to $12.70. Negotiate the surcharge table, not the discount off list.

Rail: Intermodal Still Gaining

AAR reported U.S. intermodal volume of 302,252 units in the week ending October 10, up 10.4% from a year ago, with carloads up 3.4%. On any lane of 700 miles or more where you can absorb two extra days, get an intermodal quote into the 2027 bid as a benchmark, even if you don’t award it.

Strategic Sourcing Evolution: Your 2027 Contracts Need a Better Index

The Pipeline Has Already Priced 2027

Last edition closed by asking whether anyone on your team watches steel, resin, energy and interest rates as closely as freight. This week’s PPI shows why that matters. Processed goods for intermediate demand (components, packaging and semi-finished materials) rose 2.5% in September and are up 14.1% from a year ago. Unprocessed inputs rose 8.4% and are up 21.5%, the largest monthly rise since February 2022. The Beige Book says “Higher oil prices permeated all District reports,” and that firms “expect that prices will increase further in the coming months.”

The New York Fed’s October Empire State survey shows where the pressure sits. Its general business conditions index jumped 18 points to 25.5, the highest since December 2021, and new orders rose 21 points to 23.2. Supply availability fell to −15.1, the lowest since June 2022. Prices paid were 59.5 and prices received 30.6, meaning far more firms report rising input costs than report raising their own prices. Manufacturers are absorbing cost increases now and will try to recover them in 2027 contract prices.

Every Carrier Has an Index. Most Shippers Don’t.

The week’s freight data shows suppliers are better at indexing than buyers. Parcel carriers redrew their fuel tables, and truckload contract rates follow the Cass linehaul index upward even as spot cools. Ocean carriers ran 39 blank sailings over five weeks, about 5% of scheduled capacity, according to The Loadstar’s reading of Drewry’s tracker, and Asia–Europe carriers are announcing late-October FAK increases. Each seller passes costs up quickly and down slowly. Most buyer contracts have a fixed price and a reopener, so the buyer renegotiates every time costs move.

Domino’s, reporting Tuesday, shows the buyer side can win: its supply chain unit widened gross margin to 12.2% from 11.3% on “procurement productivity.” Write 2027 supply agreements with a named index on each major input (a published PPI series, a resin benchmark, the DOE diesel average), adjustments in both directions on a set schedule, and a cap and a floor. Apply the same structure to freight: put a surcharge table in the contract that you have audited, not the carrier’s. When a supplier asks for a 2027 increase, ask which index it follows and what the price was when that index was lower.

Policy Is Adding Clauses, Not Tariffs

The White House issued no new tariff proclamations this week, but several actions changed sourcing terms. On Wednesday the Commerce Department’s Bureau of Industry and Security published its definition of “U.S. content” for USMCA-qualifying Canadian and Mexican steel, aluminum and copper products, effective for entries that day. It counts steel “melted and poured in the United States,” so Canadian and Mexican suppliers now need to document U.S.-melted inputs. On Thursday the Federal Maritime Commission proposed “a per-voyage fee on all Spanish vessels of $200,000 and restrictions on the import of certain Spanish goods,” in response to Spain refusing port access to U.S. vessels; comments are due December 14.

Two deadlines matter more. The Lindsey O. Graham Sanctioning Russia and Iran Act, signed September 18, authorizes duties of “up to 100% ad valorem” on all goods from the largest importers of Russian energy. Akin Gump’s reading is that “the President must impose these tariffs within 30 days of enactment,” which would be about October 18. The suspension of U.S. port fees on China-linked vessels still expires at 11:59 p.m. on November 9, and no USTR extension notice had appeared in the Federal Register through Thursday. Refunds are still arriving. CBP has certified about $126 billion of the roughly $166 billion in IEEPA duties collected, through October 2, according to Penn Wharton’s October 14 tracker. The Court of International Trade has not yet ruled on the Section 301 forced-labor tariffs; the parties’ post-hearing briefs are due Friday.

Before signing 2027 sourcing awards, run your supplier list against the Graham Act’s likely targets, and price any India- or Russia-energy-exposed supply at a 100% duty as a downside case. Put a change-in-law clause in every new agreement so that tariff changes are shared by a formula rather than renegotiated. Take IEEPA refunds out of the cost baseline you negotiate from.

📊 Numbers That Matter

Weekly Dashboard: Week of October 12–16, 2026

Metric	Reading	Source
CPI (Sept)	+0.6% MoM, 3.7% YoY (Aug 3.4%); core +0.3%, 2.6% YoY; energy +20.4% YoY; gasoline +9.1% MoM; core goods +0.7% YoY	BLS
PPI final demand (Sept)	+1.3% MoM (largest since March 2022), +6.3% YoY; goods +2.6% MoM; core +5.0% YoY	BLS
PPI intermediate demand (Sept)	Processed goods +2.5% MoM, +14.1% YoY; unprocessed +8.4% MoM, +21.5% YoY	BLS
Retail sales (Sept advance)	$745.0B, +0.8% MoM, +6.3% YoY; ex-gas stations +0.2%; gas stations +6.4%; Aug revised to +1.3%	Census
Empire State Manufacturing (Oct)	General conditions 25.5 (+18); new orders 23.2; prices paid 59.5; prices received 30.6; supply availability −15.1	New York Fed
Michigan sentiment (Oct prelim)	46.3 vs. 48.1; 1-year inflation expectations 4.7%	University of Michigan
Retail diesel (DOE weekly, Oct 12)	$6.179/gal, −2.0¢ WoW; third straight decline; +$2.514 (~69%) YoY	EIA
Brent crude (ICE futures)	$106.06 settle Oct 14 vs. $104.72 Oct 9	Investing.com
Drewry WCI (Oct 8)	$4,351/40ft (−2%); Shanghai–LA $7,624 (−3%); Shanghai–NY $10,220 (−2%); Shanghai–Rotterdam $3,337 (−2%); Shanghai–Genoa $3,696 (flat)	Drewry
Freightos FBX (Oct 13 update)	Asia–USWC −2%; Asia–USEC flat; Asia–N. Europe flat; Asia–Med +7% to $3,800/FEU	Freightos
DAT spot (Oct 4–10)	Van $3.12/mi all-in (+3¢), linehaul $2.26 (+5¢, +35% YoY); reefer $3.68; flatbed $3.68; van L/T 10.5	DAT via AJOT
Cass Freight Index (Sept)	Shipments +1.9% YoY; expenditures +20.4%; TL linehaul index +10.1% YoY, four-year high	Cass via FreightWaves
Rail (week ending Oct 10)	U.S. intermodal 302,252 (+10.4% YoY); carloads 232,004 (+3.4%); total 534,256 (+7.2%)	AAR via AJOT
IEEPA refunds	~$126B certified through Oct 2 of ~$166B collected	Penn Wharton Budget Model

Looking Ahead

October 16: Post-hearing briefs due at the Court of International Trade in the Section 301 forced-labor tariff case; a ruling could follow at any time after
October 18: About 30 days after enactment of the Graham Act, the window in which its Section 113 secondary tariffs of up to 100% are to be imposed
October 19: Refund motions due at the CIT for AD/CVD entries, the largest group of entries still without a refund mechanism
October 20: DOE’s next diesel update; watch whether the Hormuz sinking ends the three-week decline
October 23: University of Michigan final October sentiment
October 27–28: FOMC meeting; a 3.7% CPI and a 1.3% PPI make another hike harder to rule out, and a hike raises inventory carrying costs
November 9: U.S. port-fee suspension on China-linked vessels expires unless USTR extends it
December 14: Comments due on the FMC’s proposed $200,000 per-voyage fee on Spanish vessels
January 4, 2027: FedEx’s 5.9% average general rate increase takes effect

The Bottom Line

Producers are absorbing cost increases that shoppers won’t pay. The contracts signed this quarter will decide who in the middle of the supply chain absorbs the rest.

Index your inputs before you index your freight. Intermediate processed goods are up 14.1% and core PPI 5.0%, while core CPI is 2.6%. That gap is coming to your purchase orders. Write 2027 supply agreements with a named index on every major input, adjustments in both directions, and a cap and a floor. When a supplier asks for an increase, ask which index justifies it.

Bid freight now, but sign the right pieces at the right time. Truckload contract rates are climbing toward spot, with Cass linehaul at a four-year high and tender rejections near 14%, so lock in your truckload capacity in this bid cycle. The transpacific is turning down after a record September at Los Angeles, so open the 2027 ocean tender now and award after early November. Audit parcel and truckload surcharge tables. They now earn carriers revenue, not just recover fuel cost.

Split fuel from inputs in every customer conversation. Retailers can see the 9.1% gasoline increase in the CPI, but with sales up only 0.2% outside gas stations, they will push back on everything else. Price on fuel now, document your input costs against a published index, and decide which SKUs you will let lose volume rather than fund markdowns.

Strategic question for supply chain leaders: Your carriers have an index that lets them pass costs through quickly. Your suppliers are about to ask for one. When core producer prices are rising nearly twice as fast as core consumer prices, where in your contracts is the mechanism that decides who pays the difference, and did you write it, or did they?