Producers face record price increases

WASHINGTON— Wholesale prices, driven by rising food costs, increased 0.8% in May and by an unprecedented amount over the past year as the U.S. economy emerges from pandemic lockdowns and pushes inflation higher.

The monthly gain in the producer price index, which measures inflation pressure before it reaches consumers, followed a 0.6% increase in April and a 1% jump in March, the Labor Department reported Tuesday.

Food prices jumped a sizable 2.6%, with the cost of beef and veal rising though the cost of fresh fruits declined. Energy costs rose 2.2%, reversing a 2.4% drop in April.

Over the past 12 months, wholesale prices are up 6.6%, the largest 12-month increase on record going back to 2010.

Core inflation, which excludes volatile categories such as food and energy, rose 0.7% in May, the same as April, while core inflation rose 5.3% over the past 12 months, the largest gain on record going back to 2014.

Nearly 60% of the wholesale price increase from May reflected a 1.5% jump in prices for goods. Prices for services rose by 0.6%.

Last week, the U. S. reported that consumer prices rose 0.6% in May with prices over the past year surging 5%, the biggest 12-month gain in more than a decade.

Analysts said the big jump in wholesale prices following the sizable gain in consumer prices underscores the current upward movement in inflation.

Shortages of raw materials and intermediate goods are driving a good portion of the rise in wholesale inflation, said Michael Pearce, senior U. S. economist at Capital Economics. Shipping bottle

necks and rising labor expenses have also raised production costs. Meantime, a burst of pent-up demand has outstripped capacity, stoking further price gains.

Federal Reserve officials have said the upward pressure on prices is likely to prove temporary, but others worry that recent price gains will lead to a more sustained pickup in inflation. A Bloomberg survey of economists called for a 0.5% monthly gain in the overall measure and the same advance in the core figure.

“You have inf lationary pressures from two sides: The cost of materials is going up at the same time that demand is rising,” he said. “Typically you have one or the other, but now you have both, which is creating the crunch.”

The recent run-up comes after years of lagging inflation. While product prices can fluctuate, policymakers generally aim to keep annual inflation running at about 2%.

“We are entering what will no doubt be a long, hot summer as consumers continue to spend faster than most producers and service providers can keep up,” Diane Swonk, chief economist at Grant Thornton, wrote in a note to clients this week.

Rising prices for materials such as leather, steel, acrylics and lumber have driven up prices for desks, sofas and other high- demand furniture. Manufacturing and shipping have gotten more expensive too, as companies deal with overwhelmed factories and clogged ports. Retailers say just about every step of the supply chain has become costlier and more cumbersome in recent months, leading to steadily climbing prices.

Ocean freight shipping fees from Asia to the United States have quadrupled in some cases, from about $ 1,500 per container to $6,000 in the past year, said Mark Yeager, chief executive of Redwood Logistics.

“Individually, any one of [those hurdles] is not that significant and could be overcome,” Kurt Darrow, chief executive officer of La-Z-Boy, said in a recent earnings call. “But when you get them coming at you from six or seven different directions, the magnitude of it adds up.”

(AP/Matt Rourke) Cuts of pork fill a case at a grocery store in Roslyn, Pa., on Tuesday. Wholesale prices, boosted by rising food costs, increased 0.8% in May, and have climbed by a record amount over the past year.