Producer prices (PPI) rose at an annual rate of 8.3% in August, unprecedented in the United States, at least since this index began to be measured by the Labor Department.
On Friday, Sept. 10, the federal agency reported that its producer price index, which measures inflationary pressures before reaching consumers, rose 0.7% last month over July after increasing 1% in both June and July.
The increase in prices from Aug. 2020 to Aug. 2021 far exceeded expectations, and the impact on the consumer price index (CPI) is likely to be reflected in the near term, as rising production costs tend to be passed on to consumers quickly.
Economists had forecast that the PPI would rise 0.6% for August, down from the 1% increase reported for July and June. But in the end, on an annual basis, prices rose 8.3% versus the 7.2% forecast.
Excluding food and energy price increases, producer prices rose 0.6% monthly and 7.3% annually, a year-over-year increase also higher than expected. Excluding business services, which measure changes in wholesale and retail margins rather than prices, as well as food and energy, producer prices rose 0.3% monthly and 6.3% on the year, also a larger-than-expected annual increase.
Overall producer energy prices rose 32.3% on a non-seasonally adjusted basis over the year in August, goods advanced 12.6%, and food 12.7%, official data shows.
The PPI is an alternative inflation indicator, which measures the prices received by companies for goods and services. It is used, among other things, as a tool to forecast the inflationary behavior expected for the final consumer in the short term.
The slowdown in price increases observed during the last month of measurement may have to do with the appearance of the Delta variant. In addition, many states, especially those aligned with the federal government, took restrictive measures that led people to spend more time indoors and therefore slow down consumption.
The CPI data for August is scheduled for release on Sept.14.
While changes in production costs are usually reflected quickly in consumer prices, it’s expected to take a little longer and not be reflected in the next CPI report.
Fed officials have repeatedly said that they view consumer price increases as transitory and have maintained the expectation that inflation will eventually moderate.
While detractors of the Biden administration, however, place much of the blame on the economic policies implemented based on a “waste of taxpayer funds,” which is reflected in a considerable increase in government spending that translates into a consequent fiscal deficit, which in turn leads to an inevitable rise in prices.
Defending precisely this last premise, in a letter addressed to congressional authorities in mid-July, Republicans on the Budget Committee warned about the alarming statistics on federal government spending and proposed that Congress take concrete actions to control it.
According to reports from the Congressional Budget Office, this year’s fiscal deficit (the negative difference between what is spent and what comes in from taxes) will be 3 trillion dollars, as reported by Fox News.
It should be noted that the U.S. dollar has a direct impact not only on the finances of U.S. families but also on the economy of the rest of the world, which is deeply linked to currency fluctuations.