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U.S. producer prices continued to rise last month, soaring to the largest annual increase on record.
The inflation trend in the United States is still very active.
The Producer Price Index (PPI), which measures the prices that companies receive from goods and services, soared by 8.6% in September from the same period last year. This is the biggest jump recorded since 2010.
However, the annualized rate of wholesale inflation measures the comparison of current prices with the still struggling economy in September 2020.
Producer prices rose only 0.5% month-on-month in September. This is lower than many people expected, and it is also the lowest month-on-month increase this year.
Helping to curb the PPI headline figure is the price of services, which rose only 0.2% in September from the previous month. This also marks the slowest monthly increase this year.
Due to the surge in Delta variants of COVID-19, air travel prices have shrunk sharply, which helped to curb service prices last month.
At the same time, energy prices are currently rising due to global oil, natural gas and coal shortages, which was the main driver of the surge in wholesale inflation last month.
The final demand for energy in the United States increased by 2.8% in September, accounting for 40% of the overall rise in producer prices.
At a more granular level, gasoline prices rose by 3.9% last month.
Excluding volatile food and energy, the so-called “core” producer prices in September rose only 0.2% from the previous month, which was the smallest increase this year.
When commodity producers and service providers face higher prices, they usually pass these costs on to consumers. On Wednesday, the US Department of Labor reported that consumer prices rose 0.4% month-on-month in September and 5.4% over the past 12 months, which was the same as the 13-year annualized inflation rate set in June and July.
Inflation has become a sign of the U.S. economy’s recovery from last year’s COVID lockdown, driven by demand stimulus, supply chain bottlenecks, and shortages of raw materials and labor.
On Wednesday, President Joe Biden announced that the largest port in the United States, the Port of Los Angeles, will operate 24/7 to help clear bottlenecks and ease supply chain constraints.
Although a little bit of inflation is a good thing for the economy, because it will incentivize consumers to buy goods and services now instead of sitting in their wallets expecting prices to fall, but if it triggers a vicious price increase, excessive inflation may produce Seriously destructive spiral.
The Fed has always insisted that it believes that current inflationary pressures describe the economic recovery from COVID-19 as “temporary.”
But on Wednesday, the minutes of the Fed’s last policy-making meeting in September stated that although “staff continue to expect this year’s inflation increase will prove to be temporary,” recent inflation shows that “supply restrictions are adding more pressure to price increases. Bigger than previously expected.”
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