Tag Archives: Producer Prices

25.9% Largest spike in energy prices since 1949

Rev 6:6 NAS And I heard something like a voice in the center of the four living creatures saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not damage the oil and the wine.”

Important Takeaways:

  • German producer prices jump by record 25.9%
  • The jump in factory gate costs, considered a leading indicator for consumer prices, was the biggest since 1949, the statistics office said.
  • February’s producer prices did not take into account the effects of Russia’s attack on Ukraine.
  • Energy prices were up 68% from February 2021, the statistics office said. Stripping out energy prices, producer prices rose 12.4% year on year.

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Gasoline, auto retailing boost U.S. producer prices

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. producer prices increased solidly in October, driven by surging costs for gasoline and motor vehicle retailing, suggesting that high inflation could persist for a while amid tight global supply chains related to the pandemic.

The Federal Reserve last week restated its belief that current high inflation is “expected to be transitory.” A tightening labor market as millions remain at home is adding to price pressures, which together with shortages of goods sharply restrained economic growth in the third quarter.

The Fed this month started reducing the amount of money it is injecting into the economy through monthly bond purchases.

“The acceleration in inflation may not fade as quickly as previously thought, particularly for businesses because of the global supply-chain issues,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Elevated inflation is turning up the heat on the Fed but they haven’t shown signs of buckling as they will stomach higher inflation to get the labor market back to full employment quickly.”

The producer price index for final demand rose 0.6% last month after climbing 0.5% in September, the Labor Department said on Tuesday. That reversed the slowing trend in the monthly PPI since spring. In the 12 months through October, the PPI increased 8.6% after a similar gain in September.

Economists polled by Reuters had forecast the PPI advancing 0.6% on a monthly basis and rising 8.7% year-on-year.

More than 60% of the increase in the PPI last month was due to a 1.2% rise in the prices of goods, which followed a 1.3% jump in September. A 6.7% surge in gasoline prices accounted for a third of the rise in goods prices. There were increases in the prices of diesel, gas and jet fuel as well as plastic resins.

Wholesale food prices dipped 0.1% as the cost of beef and veal tumbled 10.3%. Prices for light motor trucks fell as the government introduced new-model-year passenger cars and light motor trucks into the PPI.

Exorbitant motor vehicle prices have accounted for much of the surge in inflation as a global semiconductor shortage linked to the nearly two-year long COVID-19 pandemic has forced manufactures to cut production, leaving virtually no inventory.

Services gained 0.2% last month after a similar rise in September. An 8.9% jump in margins for automobiles and parts retailing accounted for more than 80% of the increase in services. The cost of transportation and warehousing services jumped 1.7%, also reflecting snarled supply chains.

Surveys from the Institute for Supply Management this month showed measures of prices paid by manufacturers and services industries accelerating in October. Manufacturers complained about “record-long raw materials lead times, continued shortages of critical materials, rising commodities prices and difficulties in transporting products.”

Data on Wednesday is expected to showed strong gains in consumer prices in October, according to a Reuters survey of economists. Stocks on Wall Street retreated from record highs. The dollar was steady against a basket of currencies. U.S. Treasury prices rose.

PORT CONGESTION

There is congestion at ports and widespread shortages of workers at docks and warehouses. There were 10.4 million job openings as of the end of August. The workforce is down 3 million from its pre-pandemic level.

Worker shortages were underscored by a report from the NFIB on Tuesday showing almost 50% of small businesses reported job openings they could not fill in October.

Also on Tuesday, Fed Chair Jerome Powell emphasized the U.S. central bank’s commitment to maximum employment, telling a virtual conference on diversity and inclusion in economics, finance and central banking that “an economy is healthier and stronger when as many people as possible are able to work.”

Wholesale prices of apparel, footwear and truck transportation of freight also rose last month as did the costs of food and alcohol retailing, hospital outpatient care as well as machinery, equipment parts and supplies.

Excluding the volatile food, energy and trade services components, producer prices shot up 0.4%. The so-called core PPI gained 0.1% in September. In the 12 months through October, the core PPI rose 6.2%. That followed a 5.9% advance in September.

Construction prices surged 6.6%, the largest gain since the series was incorporated into the PPI data in 2009.

“As companies feel the squeeze from higher energy and labor costs, as well as persistent logistics issues, producer price increases should be robust in the coming months,” said Will Compernolle, a senior economist at FHN Financial in New York.

Details of the PPI components, which feed into the personal consumption expenditures (PCE) price index, excluding the volatile food and energy component, were mixed. The core PCE price index is the Fed’s preferred measure for its flexible 2% target. Healthcare costs increased 0.4%. Airline tickets rebounded 0.3%, but portfolio management fees dropped 2.2%.

Though the October CPI data is still pending, economists believed that the core PCE price index moved higher last month after increasing 3.6% year-on-year in September.

“For now, we think the core PCE price index will be up 3.8% year-on-year in October,” said Daniel Silver, an economist at JPMorgan in New York.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. producer prices rise broadly in February

A combine drives over stalks of soft red winter wheat during the harvest on a farm in Dixon, Illinois, July 16, 2013. REUTERS/Jim Young

WASHINGTON (Reuters) – U.S. producer prices increased more than expected in February, and the year-on-year gain was the largest in nearly five years, pointing to a steady rise inflation pressures.

The Labor Department said on Tuesday that its producer price

index for final demand increased 0.3 percent last month after rising 0.6 percent in January. Economists polled by Reuters had forecast a 0.1 percent uptick.

In the 12 months through February, the PPI jumped 2.2 percent, the biggest advance since March 2012 and ahead of the 2.0 percent gain forecast in the Reuters poll. It followed a 1.6 percent increase in January.

Producer prices are rising as the prior weak readings, induced by cheap oil, drop out of the calculation. Crude oil prices have risen above $50 per barrel.

Also boosting price pressures are the dollar’s 1.5 percent drop against the currencies of the United States’ main trading partners since January and overall commodity price gains in tandem with a firming global economy.

A key gauge of underlying producer price pressures that excludes food, energy and trade services increased 0.3 percent in February, the biggest gain since April 2016. The so-called core PPI rose 0.2 percent in January.

Core PPI increased 1.8 percent in the 12 months through February after advancing 1.6 percent in January.

The Federal Reserve has a 2 percent inflation target and tracks a measure that is currently at 1.7 percent. Fed officials were due to start a two-day policy meeting later on Tuesday.

The U.S. central bank is expected to raise its overnight benchmark interest rate by 25 basis points to a range of 0.75 percent and 1.00 percent. It has projected three hikes in 2017.

In February, prices for final demand services increased 0.4

percent, accounting for more than 80 percent of the rise in the PPI. That was the biggest rise since June 2016 and followed a 0.3 percent gain in January.

The cost of energy products increased 0.7 percent last month, slowing from January’s 4.7 percent surge.

Wholesale food prices increased 0.3 percent after being unchanged in January. Healthcare costs rose 0.2 percent after a similar gain in January. Those costs feed into the Fed’s preferred inflation measure, the core personal consumption expenditures index.

The volatile trade services component, which measures changes in margins received by wholesalers and retailers, rose 0.4 percent last month after shooting up 0.9 percent in January.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Lisa Von Ahn)