Wholesale inflation hits a record 9.7% annual rate after consumer prices jumped the most in 40 years

Prices at the wholesale level surged by 9.7 percent for all of 2021, setting an annual record and providing further evidence that inflation is still hammering all levels of the U.S. economy.

The producer price index, which measures inflation at the wholesale level, did slow on a monthly basis, rising just 0.2 percent in December compared with 1 percent in November, the Labor Department said Thursday.

Thursday’s report came a day after the government reported that consumer inflation jumped 7 percent in December from a year earlier, the highest such inflation rate since 1982. 

‘Persistent supply disruptions will pin producer prices near record levels in the near term, especially given a rapidly spreading omicron variant that will fan inflation pressures,’ said Kathy Bosjancic, chief U.S. economist at Oxford Economics. 

The producer price index, which measures inflation before it reaches consumers, surged by 9.7 percent for all of 2021, setting an annual record

A shipping container of T2M video game controllers for mobile devices, assembled in China, is opened for delivery at their warehouse in Pembroke, Massachusetts

A shipping container of T2M video game controllers for mobile devices, assembled in China, is opened for delivery at their warehouse in Pembroke, Massachusetts

She said Thursday’s report supported the view that the Federal Reserve will start raising interest rates in March. 

Majority of US CEOs see high inflation at least through mid-2023

In the U.S., 59 percent of CEOs expect inflation to be elevated until at least mid-2023 or beyond, according to a new survey. 

Globally, 82 percent of CEOs said they are facing upward price pressure for inputs into their businesses, according to the Conference Board survey reported by the Wall Street Journal. 

Among U.S. CEOs, more than half expect at least 40 percent of workers to work remotely after the pandemic ends. 

The 12-month increase in wholesale inflation of 9.7 percent was lower than a revised 9.8 percent increase for the 12 months ending in November. 

However, the government uses the December to December change to measure the yearly increase, and on that basis the 9.7 percent rise was the fastest annual jump on record, far above the 0.8 percent increase in 2020 and the 1.4 percent rise in 2019.

Core inflation at the wholesale level, which excludes volatile food and energy costs, rose 0.5 percent on a monthly basis in December, down from a 0.9 percent gain in November. Core prices rose 8.3 percent during the 12 months ending in December.

The slowdown in overall inflation at the wholesale level was attributed to a big 3.3 percent fall in energy prices and a smaller 0.6 percent dip in food costs.

Goods prices fell 0.4 percent after advancing 1.1 percent in the prior month. They were held down by decreases in wholesale food and energy prices. 

Excluding food and energy, goods prices rose 0.5 percent after increasing 0.8 percent in November. 

The price increases at both the wholesale and retail levels have been attributed in large part to snarled supply chains at a time of surging demand. 

Annual consumer inflation hit 7% in December, the highest 12-month increase since June 1982

Annual consumer inflation hit 7% in December, the highest 12-month increase since June 1982

President Joe Biden’s approval ratings on the economy have taken a huge hit because of the surge in prices, especially for consumer necessities like food and energy.

Persistent supply chain issues have left grocery shelves bare across the nation this week, drawing comparisons to conditions in the former Soviet Union and putting further upward pressure on prices. 

Rising prices have wiped out the healthy pay increases that many Americans have been receiving, making it harder for households, especially lower-income families, to afford basic necessities. 

Polls show that inflation has started displacing even the coronavirus pandemic as a public concern, making clear the political threat it poses to Biden and congressional Democrats, whose House and Senate majorities hang in the balance in November’s election.

The new Quinnipiac University poll has Biden’s approval rating at 33 per cent, with majority 53 per cent disapproval as the president begins the new year. 

White House economic adviser Cecilia Rouse on Thursday tried to downplay the new wholesale inflation data, blaming global issues..

‘Monthly inflation results are always volatile, and this report was driven in large part by a reduction in highly volatile energy and food prices, but also reflects potential improvement in prices for supply-chain related goods and services’, Rouse said in a statement released by the White House.

‘We continue to face challenges driven by supply chain disruptions around the world,’ Rouse added.

In a statement, Biden called inflation 'a global challenge' and claimed the latest numbers were good news, showing the monthly rate of price increases slowed in December from the prior month

In a statement, Biden called inflation ‘a global challenge’ and claimed the latest numbers were good news, showing the monthly rate of price increases slowed in December from the prior month 

Empty shelves are seen in an Atlanta Target store this week. Shoppers across the U.S. are confronting alarming shortages of basic foodstuffs and household items

Empty shelves are seen in an Atlanta Target store this week. Shoppers across the U.S. are confronting alarming shortages of basic foodstuffs and household items

A customer walks past empty shelves at Heinen's Fine Foods store Thursday in Pepper Pike, Ohio. Shortages at U.S. grocery stores have grown in recent weeks

A customer walks past empty shelves at Heinen’s Fine Foods store Thursday in Pepper Pike, Ohio. Shortages at U.S. grocery stores have grown in recent weeks

Similarly, Biden on Wednesday called inflation ‘a global challenge’ and claimed the latest numbers were good news, showing the monthly rate of price increases slowed in December from the prior month. 

‘Today’s report—which shows a meaningful reduction in headline inflation over last month, with gas prices and food prices falling—demonstrates that we are making progress in slowing the rate of price increases,’ said Biden.

Nationwide, gas prices did drop 2.2 percent in December from the prior month, but remained 50 percent higher than a year ago. Food prices were up 0.5 percent on the month and 6.3 percent higher than a year ago, making it unclear what falling food prices Biden was referring to. 

‘At the same time, this report underscores that we still have more work to do, with price increases still too high and squeezing family budgets,’ Biden admitted. 

In his response, Biden also blamed inflation on global issues outside of his control, even though inflation in the US has remained persistently higher than any other Group of Seven nation since he took office last year.

‘Inflation is a global challenge, appearing in virtually every developed nation as it emerges from the pandemic economic slump,’ said Biden. 

‘America is fortunate that we have one of the fastest growing economies—thanks in part to the American Rescue Plan—which enables us to address price increases and maintain strong, sustainable economic growth. That is my goal and I am focused on reaching it every day,’ said Biden.

January 2021, the month Biden took office, is the last time another G7 nation recorded a higher annual inflation rate than the US, according to a DailyMail.com analysis of Federal Reserve data. 

The annual US inflation rate (dark blue) is seen alongside that of the other G7 nations. US inflation has outpaced all other countries in the group of wealthy nations since January 2021, the month Biden took office

The annual US inflation rate (dark blue) is seen alongside that of the other G7 nations. US inflation has outpaced all other countries in the group of wealthy nations since January 2021, the month Biden took office

The 12-month inflation rates in the UK (red) and US (blue) are seen in comparison since 1995. Prices are now rising faster in America than in Britain, which moved quicker to raise benchmark interest rates

The 12-month inflation rates in the UK (red) and US (blue) are seen in comparison since 1995. Prices are now rising faster in America than in Britain, which moved quicker to raise benchmark interest rates

Since then, the US has far outpaced its peers on price increases, though it is true that most wealthy nations have seen elevated inflation levels as their economies roar back from the pandemic. 

In November, the latest month available, annual inflation stood at 4.6 percent in the UK and 5.2 percent in Germany. 

Japan has kept the tightest rein on inflation among the G7, recording an annual increase in the consumer price index of just 0.6 percent in November. 

High inflation has forced a policy shift by the Federal Reserve, which for months had characterized price pressures as merely ‘transitory.’ 

Chair Jerome Powell now says it was a mistake to use the word transitory to describe inflation last year. 

He told Congress this week that the Fed’s forecasts didn’t take into account how long the supply chain snarls could persist.

At its December meeting, the Fed made a sharp pivot away from its ultra-low-interest rate policies. 

It said it would accelerate the reduction of its monthly bond purchases, which were intended to lower long-term interest rates. 

The central bank also signaled that it might begin raising its key policy rate, which it has held at a record low near zero, more quickly this year. And the officials signaled that they envisioned three quarter-point increases in their policy rate this year.

The Fed credit tightening would be designed to slow the economy and keep inflation under control by raising borrowing costs for consumers and businesses. 

Read more at DailyMail.co.uk

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