US wholesale inflation over past year jumps by a record
Deficit for current budget year climbs to $2.24tn
WASHINGTON, July 14, (AP): Inflation at the wholesale level jumped 1% in June, pushing price gains over the past 12 months up by a record 7.3%.
The Labor Department reported Wednesday that the June increase in its producer price index, which measures inflation pressures before they reach consumers, followed a gain of 0.8% in May and was the largest one-month increase since a 1.2% rise in January.
For the 12 months ending in June, wholesale prices are up 7.3%, the largest 12-month increase since the government began the current series on wholesale prices in 2010.
The news on wholesale prices followed a report Tuesday that consumer prices increased in June by 0.9% and were up 5.4% over the past 12 months, the biggest 12-month gain in 13 years.
The increase in inflation is coming at a time when the economy is rebounding from the pandemic recession and rising consumer demand is bumping up against bottlenecks and supply shortages which are pushing prices higher.
Nearly 60% of the gain in wholesale prices in June reflected a jump in the cost of services, led by higher margins received by wholesalers and retailers.
Food costs at the wholesale level were up 0.8% while energy costs rose 1% in June.
Core inflation, which excludes food and energy and the trade margins, rose 0.5% in June following a 0.7% rise in May.
The big jump in inflation in recent months has called into question the position of the Federal Reserve that the price increases will be temporary and are not a sign that inflation is threatening to get out of control as it did in the 1970s.
Fed Chairman Jerome Powell in testimony prepared for an appearance before the House Financial Services Committee repeated his view that the high inflation readings of the past several months have been driven by temporary factors related to the reopening of the economy such as a surge in consumer demand and supply bottlenecks especially in such areas as auto production.
“Inflation has increased notably and will likely remain elevated in coming months before moderating,” Powell said.
Financial markets are watching the Fed’s comments closely for any indication that the central bank may decide to begin raising interest rates sooner than expected because of increased worries about inflation.
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WASHINGTON: The US government’s deficit for the first nine months of this budget year hit $2.24 trillion, keeping the country on track for its second biggest shortfall in history.
In its monthly budget report, the Treasury Department said Tuesday that the deficit for the budget year that ends in September is running 9.1% below last year’s pace.
The deficit for the full 2020 fiscal year was a record $3.1 trillion. The Congressional Budget Office is projecting that this year’s deficit will total a slightly smaller $3 trillion. The deficits in both years were bloated by the multitrillion-dollar spending packages the government has passed to combat the economic downturns caused by the coronavirus pandemic.
Before the coronavirus pandemic, the previous deficit record was $1.4 trillion, set in 2009 when the government was seeking to offset a steep economic downturn triggered by the 2008 financial crisis.
So far this fiscal year, government receipts have totaled $3.06 trillion, up 35.2% from the same period a year ago. The number for last year was pushed downward by the fact that various tax deadlines were delayed, so revenue collections were lower because payments came in after June.
Spending in the October-June period totaled $5.29 trillion, up 5.8% from the same period last year.
For the month of June, the deficit totaled $174.2 billion, 79.8% lower than the June 2020 deficit of $864.1 billion, which was record high for any month.
The huge June 2020 deficit included $511 billion spent by the Small Business Administration, primarily for its Paycheck Protection Program of forgivable loans made to small businesses. By contrast, that spending category totaled just $31 billion in June of this year. After the slight drop in the deficit this fiscal year, the CBO is projecting a further improvement to a $1.15 trillion shortfall next year.