US producer prices continued to rise last month, hitting their biggest annualized jump on record.
The inflationary trend in the United States is still alive and well.
The Producer Price Index (PPI) – which measures the prices businesses receive for their goods and services – jumped 8.6% in September compared to the same period a year ago. This is the biggest jump on records dating back to 2010.
But the annualized wholesale inflation rate measures current prices against an economy still very struggling in September 2020.
On a monthly basis, producer prices rose only 0.5% in September. It was less than many expected and the smallest month-over-month increase this year.
Prices for services, which rose only 0.2% in September from the previous month, helped bring the overall PPI figure under control. This too marked the slowest monthly gain this year.
A sharp contraction in air travel prices amid an increase in the Delta variant of COVID-19 helped keep prices down for services last month.
Meanwhile, the main driver behind the rise in wholesale inflation last month was energy prices, which are currently on the rise, due to global shortages of oil, natural gas and coal.
Final energy demand in the United States in September rose 2.8%, accounting for 40% of the widespread increase in producer prices.
On a more granular level, gasoline (gasoline) prices rose 3.9% last month.
Excluding volatile food and energy, so-called “staple” producer prices rose only 0.2% in September from the previous month – the smallest jump this year.
When producers of goods and service providers are faced with higher prices, they often pass these costs on to consumers. On Wednesday, the US Department of Labor announced that consumer prices rose 0.4% in September from the previous month and 5.4% in the past 12 months, setting a record high of annualized inflation reached in June and July.
Inflation has become a hallmark of the U.S. economic recovery since last year’s COVID lockdowns, fueled by a combination of demand stimulus, supply chain bottlenecks and fuel shortages. raw materials and labor.
President Joe Biden announced on Wednesday that the largest port in the United States – the Port of Los Angeles – will operate 24/7 to help remove bottlenecks and ease the strain on the supply chain. ‘supply.
While a little inflation is a good thing for an economy because it prompts consumers to buy goods and services now, rather than sitting on their wallets waiting for prices to drop, too much Inflation can be deeply destructive if it triggers a sharp rise in prices. spiral.
The Federal Reserve has been adamant that it views the current inflationary pressures that have characterized the economic recovery from COVID-19 as “transient.”
But on Wednesday, the minutes from the last Fed meeting in September indicated that while “staff continued to expect this year’s rise in inflation to be transient,” this latest inflation indicates that ” supply constraints put more upward pressure on prices than expected.