WASHINGTON: Producer prices in the United States rose sharply in August, resulting in the biggest annual gain in nearly 11 years, suggesting high inflation is likely to persist for some time as the relentless COVID pandemic -19 continues to put pressure on supply chains.
Strong supply and demand constraints were underscored by other data on Friday showing that the pace of inventory build-up at wholesalers slowed in July. It now takes wholesalers the fewest months in seven years to clear the shelves.
“Supply chain bottlenecks have persisted longer and more intensely than expected earlier this year, and widespread labor shortages are among the main input issues producers face. “said Will Compernolle, senior economist at FHN Financial in New York. “This means that consumer price inflation is expected to stay high for some time.”
The producer price index for final demand rose 0.7% last month after two consecutive monthly increases of 1.0%, the Labor Department said. The gain was led by a 0.7 percent advance in services after jumping 1.1 percent in July.
A one percent increase in commercial services, which measures changes in margins received by wholesalers and retailers, accounted for two-thirds of the overall increase in services. Commodity prices jumped 1.0 percent after climbing 0.6 percent in July, while food products rebounded 2.9 percent.
Prices for transportation and warehousing climbed 2.8%.
The latest global wave of COVID-19 infections, driven by the Delta variant of the coronavirus, has disrupted production at factories in Southeast Asia, the main suppliers of raw materials for manufacturers in the United States. Congestion at Chinese ports is also increasing pressure on US supply chains.
In the 12 months to August, the PPI accelerated 8.3%, the biggest year-over-year gain since November 2010, when the series was revamped, after surging by 7.8% in July.