Higher inflation signs creep into surveys
Bloomberg
Prices of materials used in U.S. manufacturing have been mounting for many months. Now signs are emerging in Texas and along the East Coast that more producers are having greater success passing on some of those costs to customers.
Recent regional Federal Reserve surveys also indicate that not only is the build-up in price pressures extending to service providers that make up the biggest part of the economy, but wages are also firming as the tight job market places a premium on skilled workers.
The reports from various Feddistrict banks show how a robust economy, the Trump administration’s tariffs and surging freight costs are combining to keep inflation percolating. The longer the following price and wage figures linger at multiyear highs, the greater the risk that consumerswill be paying more.
In Texas, a gauge of costs paid by factories for materials climbed in June to a seven-year high, while a measure of what producers receive for their wares advanced to the highest level in almost a decade, the Dallas Fedreported on Monday. The figures show more manufacturers are paying higher input prices and getting more for the final product.
Wage growth is also flexing its muscle as the economy powers ahead and companies continue to tap a shrinking labor pool of skilled and experienced workers. Labor costs are the biggest share of companies’ expenses and further pay growth could underpin inflation. In Texas, more producers and service providers are boosting pay and expect to continue to do so.
Similar results were reflected in a Philadelphia Fed report on manufacturing. going back seven years said While Texas factories were wages were rising. less upbeat about their prospects Manufacturers in the for pricing in the next mid-Atlantic also are experiencing six months, Philadelphia-area cost pressures, both producers were more confident. for materials and labor. Factories’ An index of expected average cost for production prices received jumped to an inputs and the price almostthree-decade high. they charge for their final
The pricing-outlook measure product are rising at the fastest indicates “factories will pace since 2012, Richmond have more pricing power,” Fed data released according to Niraj Shah and Tuesday showed. The region Carl Riccadonna of spans from Maryland to Bloomberg Economics. South Carolina. “While that will need monitoring, The Richmond Fed’s latest we still expect inflation figures also mirrored what is pressures to rise this happening in the broader labormarket. yearin a controlled fashion.” More firms are reporting
Price pressures in eastern wage increases as the Pennsylvania and surrounding availability of skilled workers areas aren’t just confined remainsvery lean. to manufacturers. The The question now for Fed Philadelphia Fed’s results policymakers and financial for non-manufacturing industries, markets is to what extent, or issued Tuesday, whether, these more-elevated showed more firms are paying business costs are up for merchandise and passed on in the form of raising prices for their goods higher goods and services and services. What’s more, prices for American consumers. the greatest share in records