Inflation at the wholesale level rose 8.6 percent in September compared to a year ago, the largest surge since the 12-month rate was first calculated in 2010.
The producer price index, which measures inflationary pressures before they reach consumers, jumped 0.5 percent on the month for September, compared to a 0.7 percent gain in August, the Labor Department reported Thursday.
The latest surge in wholesale prices is another signal that higher prices for consumers are likely to persist, as supply chain chaos and labor shortages drive up the cost of wholesale goods, pressuring companies to raise prices for consumers.
Food costs at the wholesale level rose 13 percent in September from a year ago, while toys rose 6 percent and sporting goods were up 12 percent, raising concerns ahead of the holiday shopping season.
Inflation at the wholesale level rose 8.6 percent in September compared to a year ago, the largest surge since the 12-month rate was first calculated in 2010
Prices for wholesale goods (red) rose 13.3% on the year while services were up 6.4%
On Wednesday, the government reported that prices for consumers level rose 0.4 percent in September, with the consumer price index up 5.4 percent over the past 12 months, matching the fastest pace since 2008.
The 8.6 percent rise for the 12 months ending in September compared to an 8.3 percent increase for the 12 months ending in August, which had been the previous record 12-month gain.
Almost 80 percent of the overall increase in wholesale prices last month was attributed to a 1.3 percent rise in the price of goods, the largest increase since May.
In September, 40 percent of the jump in goods prices reflected rising energy prices, which jumped 36 percent on the year.
The report on wholesale prices showed that core inflation at the wholesale level, excluding volatile energy and food, was up 0.2 percent in September from August and was 6.8 percent higher over the past 12 months.
The dramatic surge in inflation, which President Joe Biden and Federal Reserve Chair Jerome Powell have repeatedly dismissed as ‘transitory’, comes as huge bottlenecks in the supply chain disrupt the flow of goods to consumers.
Container ships wait outside the Ports of Los Angeles and Long Beach waiting to unload on Wednesday a supply chain chaos disrupts the movement of goods
A shortage of truckers and warehouse workers has severely impacted commerce across the country, leaving many store shelves chronically empty of certain items.
COVID-19 has also shut down factories in Asia and slowed U.S. port operations, leaving container ships anchored at sea and consumers and businesses paying more for goods that don’t arrive for months.
On Wednesday, Biden announced that the Port of Los Angeles would begin operating 24 hours a day, seven days a week to clear bottlenecks at one of America’s largest ports.
Once implemented, the proposed changes could increase output by more than 3,500 shipping containers per week, White House officials said.
Economists said that the latest jump in wholesale and retail prices reflected impacts of the pandemic as strong demand is running up against supply chain problems.
‘The demand impact will fade further over coming months,’ said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
‘But there is a risk of more persistent headwinds from broken supply chains that could keep goods prices and inflation high for longer than expected.’
Minutes released Wednesday of the Federal Reserve’s September meeting provided further indications that the central bank is preparing to start pulling back on its $120 billion in monthly bond purchases.
The consumer price index rose 5.4 percent in September from a year ago, up slightly from August’s gain of 5.3 percent and matching the increases in June and July
Federal Reserve Chair Jerome Powell has repeatedly dismissed inflation as ‘transitory’
Biden on Wednesday reached a deal with unions and business leaders from Walmart, FedEx, UPS and others to expand operations at one of the country’s largest shipping ports
The taper in bond purchase could come as soon as the Fed’s next meeting in November, as the first step in unwinding the extraordinary support the central bank has been providing the economy.
Higher prices are also outstripping the pay gains many workers are able to obtain from businesses, who are having to pay more to attract employees.
Average hourly wages rose 4.6 percent in September from a year earlier, a healthy increase, but not enough to keep up with inflation.
Rising inflation has emerged as the Achilles’ heel of the economic recovery, erasing much of the benefit to workers from higher pay.
It has also heightening pressure on the Federal Reserve’s policymakers under Chair Jerome Powell, who face a mandate to maintain stable prices.
In response to criticism, Powell and the White House have said they believe that the pickup in inflation, which well exceeds the Fed’s 2 percent annual target, will prove temporary because it stems mainly from supply shortages.
Many economists agree that the primary drivers of higher prices have been categories of goods and services that were most disrupted by the pandemic.
But other inflationary trends could prove more long-lasting. Rents, for example, are rising again in many big cities after having dropped during the pandemic.