USA: Core Producer Prices Above Expectations and PCE-Relevant PPI Components Slightly Firmer; Estimating 0.34% for September Core PCE

Core producer prices increased more than expected in September, and the PPI components relevant for PCE were on net slightly stronger than our expectations. Based on details in the CPI and PPI reports, we estimate that the core PCE price index rose 0.34% in September (vs. our expectation of 0.32% prior to today's PPI report), corresponding to a year-over-year rate of +3.12%, and we expect the headline PCE price index increased 0.51% in September and 3.64% from a year earlier. Core retail sales increased 0.1% in September, somewhat below expectations, consistent with our view that consumer spending growth is set to slow in 2026Q4 as the boost to consumer cashflow from larger-than-usual tax refunds fades and the headwind from higher energy prices remains. The signal from the business surveys was mixed: the Philadelphia Fed manufacturing index decreased by 16.9pt to 20.9, below expectations, while the Empire manufacturing index increased by 17.9pt to 25.5, well above expectations and its