The wholesale inflation rose 8.6% in September, compared to one year ago. This is the largest increase since 2010.
Thursday’s Labor Department report showed that the monthly increase of its producer price index (which measures inflationary pressures before reaching consumers) was 0.5% in September, compared to 0.7% in August.
The September 12 month gain was 8.6%, compared to the August 8.3% increase. This was the previous 12-month record.
The government reported Wednesday that retail inflation rose 0.4% in September. It also showed that its consumer price index increased 5.4% over the last 12 months. This is the fastest pace since 2008.
This year’s inflation spike is due to higher prices for food, energy, and a variety of other items such as furniture and autos. The pandemic has caused supply chain disruptions and the demand has outstripped the supply.
Core inflation at wholesale levels, which excludes volatile energy and food, increased 0.2% in September compared to August. It was 6.8% higher than the previous 12 months.
A 1.3% increase in the price for goods was responsible for almost 80% of the increase in wholesale prices. This is the largest increase since May. The rise in energy prices was responsible for 40% of the increase in goods prices. The price increases for services increased by 0.2%, but were less dramatic.
The wholesale food costs rose by 2% in September, while the energy prices increased 2.8% in September. This is the largest jump since March’s 5% increase.
President Joe Biden announced Wednesday that the Port Los Angeles would open 24 hours a days, seven days a semaine to help clear any bottlenecks at America’s largest port.
Economists believe that the rise in retail and wholesale prices is due to the effects of the pandemic. Strong demand is causing supply chain problems.
Rubeela Farooqi (chief U.S. economist, High Frequency Economics) stated that “the demand impact will diminish further over the coming months.” But there are more persistent headwinds due to broken supply chains, which could keep inflation and goods prices higher for longer than anticipated.
Minutes of Wednesday’s Federal Reserve September meeting were released. They showed that the central banks is planning to reduce its $120 billion monthly bond purchase. This could be at its next meeting in November.