These prices could torch your Thanksgiving

This year, you may not be thankful for the cost of getting all those cranberries and sweet potatoes onto your Thanksgiving table.

New numbers from the BLS find that the Producer Price Index, which tracks the average prices businesses receive for their goods and services, rose 0.3% in October from the previous month and 6.5% from a year earlier. Although the costs increased less than expected, it marks the biggest annual increase in wholesale inflation in nearly four years.

What’s fueling the spike? Surging energy costs tied to the Iran war. Although diesel prices actually fell 7.9%, the damage had already spilled over into US supply chains, driving up costs. Truck freight fees soared 3.9% in October and 26.7% for the year. And since trucks haul much of what we buy, shoppers could eventually end up picking up the tab.

Wholesale food prices are feeling the pressure in particular, rising 1.3% in October—their second straight monthly increase and biggest jump since July 2022. Fresh and dry vegetables saw the steepest rise, surging 26.7% in October after leaping 30.7% the month before.

PPI isn’t a perfect predictor of what consumers end up paying at checkout, but it can provide hints of where costs could be heading. And the latest CPI report released earlier this week offered little relief: Retail prices rose 0.4% in October—slower than September’s 0.6% increase, but still hotter than expected, burning up any hopes that inflation is under control.

Another helping of rate hikes?

This week’s deadly combo of red-hot CPI and PPI data further sets the stage for the Federal Reserve to hike interest rates at their next meeting December 8–9.

Markets have priced in an 89% chance of a quarter-point hike, according to CME FedWatch. There’s also an 11% chance of a half-point increase—and the Fed might not stop there. As Nationwide senior economist Ben Ayers warned, “Impacts from the spike in fuel prices could linger into 2027, warranting further tightening by the Fed to limit second and third order inflation impacts.”

Still, the Fed’s next move will also hinge on a third inflation gauge: the Personal Consumption Expenditures (PCE) price index. This report is the Fed’s favorite, since it tracks a wider basket of goods and services. And since elements of the PPI report feed directly into PCE, Morgan Stanley economists are now expecting core PCE to rise by 0.3% for October, with the annual inflation rate edging up to 3.2% from 3.1%.

Just to keep things interesting, the next PCE report lands November 25—the day before Thanksgiving. Looks like we’ll have one more round of inflation numbers to digest before that overpriced turkey hits the table.—JD