As a sign that inflation continues to gallop upward, U.S. producer prices reached their biggest annual gain in more than a decade in June.
Inflation could threaten the U.S. economic recovery as another dose of ammunition was obtained on Wednesday with the latest government data showing that producer prices were still at a gallop in June.
The Producer Price Index (PPI), which measures prices for goods and services sold by businesses, rose 1.0 percent in June after rising 0.8 percent in May, the U.S. Department of Labor said.
In the last 12 months, US producer prices rose by 7.3%, the most significant increase since the first year in November 2010.
The rise in service prices accounted for about 60% of the PP’s June advance.
As businesses see prices rise, these costs are often passed on to consumers. According to data released on Tuesday by producer price reports on Tuesday, US consumer prices in June had the most significant month-on-month rise since June 2008 and were the biggest year-on-year gains since August 2008.
A little inflation is good for the economy because it encourages consumers to buy goods and services, instead of sitting in wallets, because prices will go down. But excessive inflation can be very devastating if it causes a vicious upward spiral in rising prices, prompting monetary policy makers to sharply raise interest rates and rally the country’s economic recovery from COVID-19.
The head of the U.S. economy, Federal Reserve Chairman Jerome Powell, is not worried about that. For months now the head of the Fed has repeatedly said he and his political leaders believe the current wave of high prices is a temporary consequence of raw material and manpower supply bottles, as businesses massively reject COVID-19 restrictions in response to renewed demands. consumers.
In notes prepared for congressional testimony that will be delivered later Wednesday, Powell reiterated the Fed’s view that inflation “is likely to see inflation rise in the coming months before it moderates.”
But other economists and data observers are concerned that inflation may not be temporary and that the Fed may act too late.
There is some evidence to suggest that a rise in prices may be the peak.
Voluntary food, energy and trade services were eliminated and producer prices rose by 0.5% in June, after rising by 0.7% in May. During the year, they gained 5.5 percent last month, the biggest advance since those data were calculated in August 2014.
For now, the Fed has pledged not to raise interest rates until the country’s labor market has fully recovered from the devastation of the coronavirus pandemic.
In June, the nation’s unemployment rate was 5.9 percent – well above the 3.5 percent pre-pandemic level. And there were 9.5 million unemployed last month.
In May, 9.2 million jobs were opened in the US. And a sign of confidence that some Americans have in terms of job expectations, of which about 3.6 million left work in May.
Some accuse the federal government, which charges $ 300 a week in unemployment benefits, of acting as an impediment to unemployed people digging the sidewalk to look for work. Others cite the fear of COVID-19, which at the same time challenges too many businesses that continue to employ the same type of workers and the challenges of caring for unemployed children.
Dozens of states — most led by Republican governors — are pulling out of $ 300 a week in federal unemployment benefit programs.
To attract job candidates to take open positions, some businesses have been raising salaries or signing bonuses. Some economists are concerned that a pay rise could create a wage price spiral. Others have pointed out that the wages of low-income Americans have lagged behind the pandemic, and that they are only getting a long-standing rise.