WASHINGTON: US producer prices increased solidly in August, leading to the biggest annual gain in nearly 11 years, suggesting that high inflation is likely to persist for a while as the unrelenting COVID-19 pandemic continues to pressure supply chains.
Strong demand and supply constraints were underscored by other data on Friday showing the pace of inventory accumulation at wholesalers slowed in July. It is now taking wholesalers the fewest months in seven years to clear shelves.
"Supply chain bottlenecks have persisted longer and more intensely than most predicted at the beginning of this year, and widespread labor shortages are among the main input issues producers are dealing with," said Will Compernolle, a senior economist at FHN Financial in New York. "This means consumer price inflation should remain elevated for a while."
The producer price index for final demand rose 0.7 percent last month after two straight monthly increases of 1.0 percent, the Labor Department said. The gain was led by a 0.7 percent advance in services following a 1.1 percent jump in July.
A one percent increase in trade services, which measure changes in margins received by wholesalers and retailers, accounted for two-thirds of the broad rise in services. Goods prices jumped 1.0 percent after climbing 0.6 percent in July, with food rebounding 2.9 percent.
Transportation and warehousing prices shot up 2.8 percent.
The latest global wave of COVID-19 infections, driven by the Delta variant of the coronavirus, has disrupted production at factories in Southeast Asia, key raw materials suppliers for manufactures in the United States. Congestion at Chinese ports is also adding to the pressure on U.S. supply chains.
In the 12 months through August, the PPI accelerated 8.3 percent, the biggest year-on-year advance since November 2010 when the series was revamped, after surging 7.8 percent in July.
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