U.S. producer prices jump

Inflation at the wholesale level climbed 8.3% last month from August 2020, the biggest annual gain since the Labor Department started calculating the 12-month number in 2010. The Labor Department reported Friday that its producer price index — which measures inflationary pressures before they reach consumers — rose 0.7% last month from July after increasing 1% in both June and July. Meats, residential natural gas, industrial chemicals and motor vehicles were among the goods that moved higher.

The situation

Inflation has been stirring as the economy recovers from last year’s brief but intense coronavirus recession. Supply chain bottlenecks and a shortage of workers have pushed prices higher. Federal Reserve Chair Jerome Powell has called the price spikes temporary and has warned of the dangers of the central bank raising its benchmark interest rate (now near zero) prematurely, potentially stalling the economy’s comeback.

“Since the pandemic, supply chains have never been the same and likely won’t normalize for at least six months,” said a report by Contingent Macro Advisors. “Only then will we (and, more importantly, the Fed) get a true sense of the trend rate of producer inflation.”

What it means

The economy’s brisk recovery appears to have hit a late summer lull as COVID-19’S highly contagious delta variant discourages Americans from shopping in stores or going out to restaurants.

Retail sales dropped in August, and employers added just 235,000 jobs last month, a third of what economists were expecting, and a sharp drop from June and July, when about 1 million jobs were added each month.

What happens next?

The Labor Department’s report on August consumer prices comes out Tuesday. Economists expect it to show a 0.4% advance in the CPI from the prior month and a 5.3% increase from August 2020.

Several districts surveyed by the Federal Reserve “indicated that businesses anticipate significant hikes in their selling prices in the months ahead,” according to the U.S. central bank’s Beige Book released Wednesday.

The elevated cost pressures and supply chain bottlenecks are augmenting the uncertainty already faced by businesses.

DAVID ZALUBOWSKI/AP A steady rise in the price of meats in grocery stores is just one of the factors contributing to the biggest 12-month gain in inflation since the Labor Department began calculating the producer price index.