Signs of higher U.S. inflation creep into Fed surveys

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 Fed district banks show how a robust economy, the Trump administration’s tariffs and surging freight costs are all combining to keep inflation percolating. The longer the following price and wage figures linger at multiyear highs, the greater the risk that consumers will 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 Fed reported 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.

While Texas factories were less upbeat about their prospects for pricing in the next six months, Philadelphia-area producers were much more confident. An index of expected prices received jumped to an almost three-decade high.