The latest spike in fuel prices is harder to stomach than the one earlier this year as businesses and consumers have less capacity to absorb the shock, while fresh price data show inflation is spilling over beyond energy.

While crude oil prices have somewhat moderated despite the Iran war reescalating recently, refining constraints have kept gasoline and diesel costs high. Average diesel prices hit $6.30 a gallon Wednesday, up about 68% from before the Iran war, according to AAA. And because diesel is especially critical as an industrial fuel used in manufacturing, farming, and transportation, its price surge has been pervasive across sectors.

The Labor Department’s consumer price index showed core inflation rose to 2.6% in September from 2.4% in August, signaling businesses are passing on more costs. Meanwhile, the retail sales report showed core spending outside gas stations rose just 0.2% as fuel took a bigger bite out of wallets.

Those trends were backed up by the Federal Reserve’s latest Beige Book survey of business and economic conditions, which was riddled with red flags about higher fuel prices across the country.

It showed that not only were more fuel surcharges popping up throughout the supply chain, but that profit margins were also getting squeezed and consumers were pulling back on spending to offset the pain at the pump^[1].

The New York Fed said one food manufacturer had not seen such broad-based inflationary pressures since the pandemic. The San Francisco Fed noted another manufacturer’s complaint that every material purchased in recent weeks came with a freight surcharge.