The numbers: U.S. wholesale prices rose sharply in September for the ninth month in a row and signaled that the highest bout of U.S. inflation in 30 years is likely to last at least into early 2022.
The producer price index jumped 0.5% last month, the government said Thursday. Higher costs of gasoline, beef, vegetables, electricity and chemicals were the biggest contributors.
Economists polled by The Wall Street Journal had forecast a 0.6% advance.
Although the increase in wholesale prices was the smallest since last December, they have risen at least 0.5% for nine months in a row.
Before the pandemic they averaged less than a 0.2% increase each month.
The pace of wholesale inflation over the past 12 months, meanwhile, rose again to 8.6% from 8.3%. That’s the highest level since the index was reconfigured in 2010, and likely one of the highest readings since the early 1980s.
Other measures such as the consumer price index are also at a 30-year high.
Big picture: The burst of high U.S. inflation is not going to subside very quickly like the Federal Reserve once predicted. Many economists think it could stay above 3% all of next year instead of dropping to around 2% as the Fed expects.
The biggest source of inflation is a shortage of business parts and supplies that are gumming up the entire economy. Rising gas prices and labor costs are now adding to the upward pressure on prices.
These problems are expected to persist for months or even longer, raising the odds the U.S. could be facing its biggest period of sustained inflation in decades.
Key details: On the face of it, the smallest increase in wholesale prices since the end of last year would seem to suggest some relief from high inflation is coming. Yet the latest PPI report is sprinkled with oddities.
The wholesale cost of airline fares, for example, sank almost 17% in September, mostly reflect a decline in travel when delta cases spiked. With delta receding, prices should spring back soon.
The cost of transportation and warehousing also sank a surprising 4% last month, but it seems like an anomaly. Ports are backed up, truckers are hard to find, space on rail cars is limited and major shippers such as Fedex
are raising prices.
“As any company will tell you, [that] has no basis in reality,” said chief economist Joshua Shapiro of MFR Inc.
The cost of a broader range of goods and services, what’s more, are rising compared to earlier in the year when increases were concentrated in a few products such as lumber and used vehicles.
“The breadth of inflation should be very disturbing to Fed officials,” said chief economist Stephen Stanley of Amherst Pierpont Securities.
About 80% of the increase in wholesale inflation last month reflected the higher cost of basic staples such as gasoline and food.
What’s worse, energy prices are still on the rise and lots of food producers have recently announced price increases.
The cost of services rose just 0.2%, but it’s a volatile category that can swing sharply from month to month.
The core rate of wholesale inflation, meanwhile, rose a scant 0.1% last month to mark the smallest increase in 16 months. And the increase in the core rate over the past 12 months actually felly to 5.9% from 6.3%.
The core rate strips out food, energy and trade margins and is normally a less volatile measure that gives a more accurate picture of inflationary trends. Yet the low reading in September is viewed as suspect.
One reason: There is still plenty of inflation in the “pipeline” of the economy. The cost of raw and partly finished goods in the earlier stages of production both rose sharply in September.
What they are saying? “There’s no question producers are struggling with supply chain issues and labor shortages, so it’s way too early to call the relatively low increases in core PPI a harbinger of a new trend,” said senior economist Will Compernolle of FHN Financial.