Inflation Kicks Producer Price Index Into Sharpest Jump of Its Recorded History


Rising inflation kicked the Producer Price Index to its highest level on record in July as the year-over-year cost to produce goods grew at a pace of 7.8 percent, according to the U.S. Bureau of Labor Statistics.

Producer prices in July increased more than the Department of Labor expected, according to Reuters.

The price index for final demand in July rose by one percent — in line with an identical rise for the month of June. Predictions from economists polled by The Wall Street Journal were that the index would increase for the month of July by only 0.6 percent, MarketWatch reported.

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The anticipated cooling of costs to manufacture did not occur as expected as inflation ravages Americans.

What is the Producer Price Index?

“The Producer Price Index (PPI) program measures the average change over time in the selling prices received by domestic producers for their output,” the BLS said. “The prices included in the PPI are from the first commercial transaction for many products and some services.”

According to the BLS, PPI demand increased by 7.8 percent since July of last year. The jump was the strongest since PPI records began being tracked in 2010.

MarketWatch reported the six consecutive months of sharp price increases offered “little evidence that a big wave of inflation is on the verge of cresting.”

Mahir Rasheed, an economist at Oxford Economics, explained the situation for cash-strapped Americans to Reuters.

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”We expect the July report to mark the peak of producer price inflation as supply pressures gradually unwind in the coming months and demand moderates from its blistering pace in the first half of the year,” Rasheed said. “However, stubborn pandemic disruptions will continue to hamper supply through year-end.”

Simply put: Things are getting more expensive as they are harder to obtain, and that trend shows no signs of slowing down.

Higher producer prices mean that Americans can expect to continue paying more for basic goods and services.

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Reuters attributed the continuation of rising prices to the coronavirus pandemic and its related shortages and supply chain disruptions.

“Last month’s increase in the costs of services was led by a 1.7% jump in trade services, which measure changes in margins received by retailers and wholesalers,” the wire service noted. “Twenty percent of the increase in services was due to margins for automobiles and parts retailing, which rose 11.2%.”

The price of outpatient medical care, airline travel, and equipment and machinery also increased last month.

A lack of available inventory and raw goods across multiple sectors of the economy is blamed on supply shortages, as is a shortage of willing workers.

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Johnathan Jones has worked as a reporter, an editor, and producer in radio, television and digital media.
Johnathan "Kipp" Jones has worked as an editor and producer in radio and television. He is a proud husband and father.