Diesel Price Surge Starts Pushing Up Freight, Food and Toy Costs Across the US

Record diesel prices are no longer just a problem at the pump. Labor Department data released Thursday showed US producer prices rising far more than expected in September, which points to firmer consumer inflation in the coming months as businesses pass on higher costs. Diesel has more than doubled over the past year, and Oxford Economics describes it as the workhorse fuel of the economy because nearly everything people buy travels by truck at some point.

Freight Costs Climb Faster Than After the Pandemic

The producer price gauge for truck freight was up 19% from a year earlier, the biggest jump in just over four years. Shipping costs are reacting faster to fuel than they did after COVID, since demand is healthier now, with unemployment at a historically low 4.2%, and the fuel itself costs more than twice what it did when the recovery began.

Food Input Costs and Grocery Price Outlook

Diesel powers tractors, harvesters and delivery trucks, so farming costs are feeling the pressure. Early stage food input prices rose 15.6% year over year, again the most in about four years, with feed items such as corn, hay and oilseeds up more than 25%. Final food prices in September were fairly tame, but Oxford economist Matthew Martin expects food inflation to pick up later this year.

Manufacturing Materials and Holiday Toy Prices

Manufacturing inputs are rising at double digit annual rates, leaving producers to absorb the hit or pass it on. Toys, which are exposed to higher shipping costs, saw their biggest monthly price increase on record in September, a warning sign for a pricier holiday shopping season.