Authored by Lance Roberts via RealInvestmentAdvice.com,
The PPI vs CPI gap is the widest since 2022, and history says record profit margins are in the crosshairs...
Key Takeaways
- Producer prices rose 6.3% in the year to September 2026, the fastest pace since late 2022. Consumer prices rose 3.7%. That 2.6-point PPI vs CPI gap reflects costs companies are eating rather than passing on.
- Further up the pipeline, the pressure is larger still: processed goods for intermediate demand rose 14.1%, and unprocessed goods rose 21.5%.
- After-tax corporate profits hit a record 13.1% of GDP in the second quarter. Third-quarter earnings are tracking 30% growth, and analysts expect 28% next quarter.
- Six times since 1950, producer inflation outpaced consumer inflation by 4 points or more. In four of them, the profit share of GDP fell 1 to 4.4 points within two years. The two exceptions had consumers with rising incomes. Today, real hourly earnings are down 0.7%.
The most important number in October’s inflation reports wasn’t the one that made the headlines. Everyone watched the Consumer Price Index print 3.7%. Far fewer noticed the Producer Price Index for final demand. It jumped 1.3% in a single month, the largest gain since March 2022, and the annual rate hit 6.3%. When you put PPI vs CPI side by side, the gap tells you who is paying for inflation. Right now, that’s corporate America, and it’s paying from the highest profit margins ever recorded.
