Friday brought further confirmation of rising inflation after the U.S. Department of Labor said its producer price index (PPI) – which measures the prices companies get for the goods and services they sell – rose 8.3 percent in August The previous year, the largest since the first data measurement in November 2010.
If consumers in the United States feel that their dollar is no longer as expansive as it used to be, there is a good reason for it.
Because that’s not it.
Friday brought further confirmation of rising inflation after the U.S. Department of Labor said its producer price index (PPI) – which measures the prices businesses get for the goods and services they sell – rose 8.3 year-over-year in August Percent has risen.
This is the greatest advance since the first data measurement in November 2010.
The August PPI rose 0.7 percent from the previous month, when producer prices rose 1 percent.
Inflation has become a hallmark of the US and global economy recovering from COVID-19 as companies ramp up their activities en masse, creating shortages in raw material supplies. The labor shortage is also a headache for US companies, many of whom have had to raise their wages or offer contract bonuses in order to attract workers.
In July the US had a record 10.9 million job vacancies.
The prices for end-demand services rose 0.7 percent last month, marking the eighth increase in a row.
Remove food and energy, which tend to be more volatile, and the so-called “core” PPI rose 0.3 in August after rising 0.9 percent in July.
Over the course of the year, core producer prices rose 6.3 percent – the largest increase since the data was first calculated in 2014.
When business prices rise, those costs are often passed on to consumers, who spend about two-thirds of US economic growth.
While a little inflation is a good thing for an economy because it encourages consumers to buy goods and services now instead of sitting on their wallets expecting prices to fall, inflation too high can be deeply destructive when it is vicious Price increase triggers spiral.
The big fear is that if inflation got out of hand, it could cause the Federal Reserve to hike rates abruptly and potentially undo the economic recovery.
However, US Federal Reserve chairman Jerome Powell has repeatedly said that he and his other policy makers believe that the current wave of price hikes is a temporary result of supply shortages and that inflation will eventually ease.
Inflation is also tougher for lower-income households as it eats up a larger portion of their income, especially on essentials like food and gasoline.
The economic recovery hit a speed bump this summer as COVID-19 infections related to the highly contagious delta variant of the coronavirus spiked parts of the country.
On Wednesday, the Federal Reserve announced that US economic activity “shifted down” in July and August. Last month the economy created a meager 235,000 jobs – the slowest pace of job creation since January and a dramatic slowdown from the previous month.