PPI final demand up 0.4% in August, after +0.1% in July and -0.1% in June. Year-on-year, +5.4% unadjusted, a clear acceleration. Excluding food, energy and trade services, +0.3% on the month, +4.7% year-on-year.

Over three-quarters of the goods increase (+1.1% on the month) came from energy (+4.2%). Diesel alone jumped 24.1% on the month, over a third of the total goods increase by itself. Gasoline, jet fuel and home heating oil also rose sharply. This is direct, quantified confirmation at the producer level of what this analysis series has documented for weeks, the Middle East oil shock (Brent above $100, Hormuz disrupted, Saudi Arabia attacked) is now concretely spreading into US production costs.

Intermediate demand indexes confirm acceleration at every production stage, stage 1 (+1.4%), stage 2 (+0.8%), stage 3 (+0.8%), stage 4 (+0.4%). Stage 1, the most upstream, shows the sharpest increase, consistent with a shock originating in energy raw materials and moving up the chain. Unprocessed goods for intermediate demand jumped 12.8% year-on-year, processed goods 11.5%, a sign the cost pressure is far from exhausted and will keep feeding into final prices in coming months.

Services up just 0.1% on the month, but transportation and warehousing jumped 2.3%, driven by truck freight transportation (+2.0%). Consistent with rising fuel costs passing through directly into the logistics sector. Fuel and lubricant retailing margins fell 11.3%, a sign retailers are absorbing part of the shock rather than fully passing it on, suggesting limited room before the pressure reaches the end consumer.

This is a strong print, consistent with Warsh's hawkish Jackson Hole tone rather than Waller's dovish read. PPI is a leading indicator for CPI, an acceleration this sharp at the producer level, driven by a persistent rather than transitory energy shock, seriously complicates Waller's disinflation argument. DXY, bullish bias reinforced, this print could tip the balance toward the Fed's hawkish camp ahead of the crucial CPI that Waller himself identified as decisive for the September meeting. Consistent with the pattern already seen where the ECB, too, is building more persistent inflation into its projections citing the same Middle East factor.

The upcoming US CPI becomes even more decisive after this PPI print. If CPI confirms rather than contradicts this acceleration, Waller's case for waiting "one more month" collapses, which would push Fed pricing back toward the Warsh camp (September hike). PPI isn't always a perfect CPI predictor (differences in scope, weighting), but the scale of the diesel/fuel shock here is hard to ignore for the upcoming consumer inflation read.

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