As a sign that inflation continues to gallop upwards, US production prices recorded their largest annual increase in June in more than a decade.
Those who fear inflation could pose a threat to the U.S. economic recovery got another dose of ammunition on Wednesday, with the latest government data showing producer prices continued to rise in June.
The producer price index (PPI), which measures the prices companies get for the goods and services they sell, rose 1.0 percent in June, after rising 0.8 percent in May , said the U.S. Department of Labor.
Over the last twelve months, US production prices rose by 7.3%, the strongest advance since annual figures fell in November 2010.
The rise in service prices accounted for about 60 percent of the June advance on the PPI.
When companies see prices rise, these costs are often passed on to consumers. Wednesday’s report on producer prices followed data released Tuesday that showed U.S. consumer prices experienced the sharpest one-month rise in June since June 2008 and its largest annual increase since of August 2008.
A little inflation is good for an economy, as it encourages consumers to buy goods and services now, rather than sitting in the portfolio waiting for prices to go down. But excessive inflation can be profoundly destructive if it triggers a vicious upward price spiral that causes monetary policy makers to sharply raise interest rates and derail the nation’s economic recovery from COVID-19.
The intendant of the U.S. economy, Federal Reserve Chairman Jerome Powell, is not worried about that. For months, the head of the Fed has repeatedly said that he and his fellow decision-makers believe the current wave of higher prices is a temporary consequence of the formation of bottlenecks in the supply of raw materials and labor. work, as companies massively rule out restrictions on COVID-19 to meet the demands for invigorating. consumers.
In statements prepared for congressional testimony to be delivered later Wednesday, Powell reiterated the Fed’s view that inflation “is likely to remain high in the coming months before it moderates.”
But other economists and data observers are concerned that inflation is not so temporary and that the Fed is acting too late to domesticate it.
There is some evidence to suggest that price hikes could peak.
Eliminating volatile food, energy and trade services and producer prices rose 0.5 percent in June after rising 0.7 percent in May. During the year, they gained 5.5% last month, the biggest advance since these data were calculated in August 2014.
For now, the Fed remains committed to not raising interest rates until the domestic labor market has fully recovered from the ravages of the coronavirus pandemic.
In June, the nation’s unemployment rate was 5.9%, well above its pre-pandemic level of 3.5%. And last month there were 9.5 million unemployed workers.
But in May, there were 9.2 million jobs in the US. And, as a sign of the confidence some Americans feel in their job prospects, about 3.6 million of them quit their jobs in May.
Some blame the federal $ 300 a week surcharge on state unemployment benefits for acting as a disincentive for the unemployed to hit the pavement in search of work. Others cite the fear of COVID-19, the excessive number of companies pursuing the same type of workers at once, and the challenges of daycare to prevent the unemployed from being able to take care of themselves.
Dozens of states — most led by Republican governors — are withdrawing from federal unemployment benefit programs that include the $ 300 weekly top-up.
To attract candidates for open jobs, some companies have increased salaries or offered bonus signs. Some economists are concerned that rising wages could trigger a wage price spiral. But others point out that the paychecks of low-income Americans had fallen behind before the pandemic, and that they are simply receiving a backlog.