Producer prices rose 11.2%, foreshadowing higher inflation in the future

Producer prices rose 11.2%, foreshadowing higher inflation in the future

The Producer Price Index rose by a record 11.2% over a year ago, reports CNBC. That means a higher inflation rate in the future, because the PPI is a “forward-looking inflation measure as it tracks prices in the pipeline for goods and services that eventually reach consumers”:

  • The producer price index, which measures prices paid by wholesalers, rose 1.4% in March and 11.2% from a year ago, both records for data going back to 2010.

  • Prices for final demand goods led with a 2.3% monthly rise, while services prices gained 0.9%.

  • Wednesday’s release comes the day after the BLS reported that the consumer price index for March surged 8.5% over the past year.

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The prices that goods and services producers receive rose in March at the fastest pace since records have been kept, the Bureau of Labor Statistics reported Wednesday. The producer price index, which measures the prices paid by wholesalers, increased 11.2% from a year ago, the most in a data series going back to November 2010. On a monthly basis, the gauge increased 1.4%, above the 1.1% Dow Jones estimate and also a new record….PPI is considered a forward-looking inflation measure as it tracks prices in the pipeline for goods and services that eventually reach consumers.

Wednesday’s release comes the day after the BLS reported that the consumer price index for March surged 8.5% over the past year, above expectations and the highest reading since December 1981. On the producer side, prices for final demand goods led with a 2.3% monthly rise, while services prices gained 0.9%, up sharply from the 0.3% February increase. Goods inflation has outstripped services during the Covid pandemic, but March’s numbers indicate that services are now catching up as consumer demand shifts. Energy prices were the biggest gainer for the month, rising 5.7%, while food costs increased 2.4%.

Inflation is over twice as high in the U.S. as it is in Europe. In Europe, the inflation rate is only about 4%.

Joe Biden has fueled inflation. The inflationary effect of Biden’s policies have been described by both liberal and conservative economists. The Biden administration recently proposed regulatory changes that will inflate the cost of government procurement at taxpayer expense.

Larry Summers, who was Treasury Secretary under Bill Clinton, says that recent increases in government spending have exacerbated inflation. Steven Rattner, who was in Obama’s Treasury Department, warned his fellow Democrats that big government spending would spawn inflation.

As Rattner noted in the New York Times, the Biden administration adopted the “wrong” policies on “this critical issue” even after liberal economists warned against them:

They can’t say they weren’t warned — notably by Larry Summers, a former Treasury secretary and my former boss in the Obama administration, and less notably by many others, including me. We worried that shoveling an unprecedented amount of spending into an economy already on the road to recovery would mean too much money chasing too few goods….The original sin was the $1.9 trillion American Rescue Plan, passed in March. The bill — almost completely unfunded — sought to counter the effects of the Covid pandemic by focusing on demand-side stimulus rather than on investment. That has contributed materially to today’s inflation levels.

Yet Biden has doubled down on these inflationary policies. In March, Biden signed an across-the-board increase in federal spending that will increase inflation even further. Last May, Biden proposed a record $6 trillion budget that “would push federal spending to its highest sustained levels since World War II” as a share of our economy, reported the New York Times. The Biden administration itself forecast budget “deficits at more than $1 trillion for at least the next decade” if his budget plan were adopted, noted CNN.

Biden’s “Build Back Better” plan would lead to more inflation, according to economists across the political spectrum. Manhattan Institute senior economist Brian Riedl said it would “fuel inflation.” U.S. Chamber of Commerce Senior Economist Curtis Dubay said the bill will “undoubtedly worsen“ inflation. The Committee for a Responsible Federal Budget’s Marc Goldwein said, “I expect inflationary pressures” from “Build Back Better.” Former Congressional Budget Office Director Doug Elmendorf said Biden’s agenda “will tend to push up” inflation. Bank of America economist Ethan Harris said Biden’s plan will “create even more price pressure.”

LU Staff

LU Staff

Promoting and defending liberty, as defined by the nation’s founders, requires both facts and philosophical thought, transcending all elements of our culture, from partisan politics to social issues, the workings of government, and entertainment and off-duty interests. Liberty Unyielding is committed to bringing together voices that will fuel the flame of liberty, with a dialogue that is lively and informative.

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