U.S. producer prices rose 1.3% month over month in September, more than double the 0.6% expected and the largest increase since March 2022. Annual producer price inflation reached 6.3%, its highest level since December 2022. The surge was driven by energy, with prices jumping 10.8%, although services also showed upward pressure. Excluding food, energy and trade services, the index increased 0.5% month over month and 5.0% year over year.

Our Take

The report heightens the risk that energy-driven price pressures will spread to other categories and delay further disinflation. While the pass-through to consumers is not automatic, companies face higher costs that they may absorb through narrower margins or partially pass on to customers. This complicates the case for a Fed pause and strengthens the arguments for another rate hike.

U.S. retail sales increased 0.8% month over month in September, following a revised 1.3% gain in August, and rose 6.3% year over year. The increase was driven by gasoline stations, where sales jumped 6.4%. Excluding autos, sales climbed 0.9%, but excluding both autos and gasoline, growth slowed to 0.2% from 1.1% the previous month.

Our Take

Consumer spending growth continues to support the economy, although the headline figure overstates its underlying strength by reflecting higher fuel prices. The slowdown in sales excluding autos and gasoline points to softer consumption momentum and a growing risk that higher energy spending will crowd out other purchases.

Eurozone industrial production fell 0.5% month over month in August, following a revised 0.3% decline in July, and contracted 1.1% year over year. This marked the third consecutive monthly decline. The monthly contraction reflected lower output of intermediate goods and energy, down 0.8% and 0.6%, respectively, partially offset by increases of 0.4% in capital goods and 0.2% in durable consumer goods.

Our Take

The figures point to a weak industrial contribution to third-quarter growth and raise questions about the strength of the sector's recovery. Elevated energy costs could continue to weigh on production and corporate margins, while persistent inflation limits the ECB's room to support economic activity.

Corporate News

CoreWeave, an AI cloud computing provider, fell another 5.7% after plunging 15% on Wednesday. Its bonds maturing in 2032 traded below 78 cents on the dollar, reflecting concerns about the company's ability to service its debt. The declines followed remarks from its co-founder that the company is seeking the “privilege” of borrowing “unlimited” amounts.

Anthropic told prospective investors that its third-quarter revenue reached $16.8 billion. The figure points to a moderation in its growth rate, although the increase in revenue in absolute terms remains substantial.

Bank of New York Mellon reported better-than-expected earnings, supported by higher interest rates. The results show that, despite uneven performance across banks this earnings season, institutions focused on asset custody and trust services continue to benefit from a high-interest-rate environment.

The To-Do List

  • Watch whether the semiconductor selloff and credit stress spread to other segments of AI infrastructure financing.

  • Today is chest, shoulders and abs day. Complete three sets of 12 repetitions of dumbbell chest presses, lateral raises and crunches. Rest one minute between sets and finish with a 10-minute walk.

  • Remember that today marks another anniversary of the synthesis of norethisterone by Mexican chemist Luis Ernesto Miramontes, a key component in the development of the world's first oral contraceptive pill.

Quote of the Day…

“A man's mind, once stretched by a new idea, never regains its original dimensions.” — Oliver Wendell Holmes