U.S. producer prices reached a new high, boosting inflationary pressure

The prices that suppliers charge companies and other consumers increased again at the quickest annual rate in almost 11 years in May, as inflation pressure continues to rise in the U.S.

The Labor Department said on Tuesday that its producer-price index gained 0.8 % in May compared to the previous month, up from 0.6 % in April compared to March. Between 2017 and 2019, the average increase was 0.2 %.

PPI prices, which exclude volatile food, energy, and trade components, climbed 0.7 % in May compared to the previous month.

The Producer Price Index (PPI), which analyses changes in manufacturing costs, has risen in recent months. Material price increases and shortages paired with shipping bottlenecks and growing labor costs have increased manufacturing costs. Meanwhile, a surge in pent-up demand has outpaced capacity, fueling more price gains, Bloomberg reported.

The prices of that increase in May included Beef and veal increased by 10.5 %, while mobile homes increased by 3.5 %. Prices for new automobiles, machinery and equipment, and furnishings have all risen dramatically. While goods prices drove the majority of total producer inflation, prices for services rose 0.6 % in May over the previous month, marking the fifth consecutive monthly increase.

The Federal Reserve officials anticipate the current rise will be temporary as supply and demand issues are balanced out and low readings from the pandemic lockdown are flushed out of the system.

The total PPI increased by 6.6 % year over year, a number inflated by the fact that it was compared to a soft reading in May of last year. The rise was the highest since statistics began in 2010.

A 1.5 % increase in goods prices accounts for over 60% of the increase in the final demand index in May.

Consumers have been cutting down on purchases as the effects of government stimulus cheques have worn off, while inflation numbers have drawn the attention of Wall Street.

Retail sales, excluding vehicles, fell 0.7 % in May, significantly below the 0.5 % gain forecast.

Sales of building materials and garden supplies were down 5.9% for the month, miscellaneous stores sales dropped 5% and general retail sales have dropped 3.3 %.

While Clothing and accessory have seen an increase in sales since May 2020, Sales at restaurants increased by 1.8 % highlighting the shift towards services spending as people get back to normal life.

Basically, out of 13 major retail categories, eight reported a decline in sales receipts last month.

Picture Credits: Bloomberg