Producer prices are rising at the fastest annual rate since 2011

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Prices charged by producers have risen 4.2% in the past 12 months, the fastest rise since 2011, as the recovery from the coronavirus pandemic drives up demand, according to data released Friday by the Bureau of Labor Statistics.

The Producer Price Index (PPI) has risen at its fastest annual rate in a decade, largely due to the massive and brutal economic impact of the COVID-19 pandemic.

Prices fell sharply about a year ago as the pandemic derailed the global economy, but have risen from those lows as businesses prepare for a return to normal activity.

“Part of the sharp year-over-year increase in PPI reading was caused by declines in price readings during COVID shutdowns last spring. This will continue in April, as the 12-month change in the PPI could reach 6.0%, ”said Ben Ayers, senior economist at Nationwide Insurance.

“These base effects will wear off later this year and should push year-over-year comparisons to close to normal by the end of the year.”

The PPI minus food, energy and commercial services prices – which are typically more volatile – rose 3.1% in the past 12 months, the fastest rate since 2018.

Producer prices also jumped 1% in March, mainly due to a sharp increase in energy prices due to the acceleration of the economy and brutal winter conditions. PPI minus food, energy and trade rose 0.6 percent in March.

Most economists expect inflation to continue rising through 2021 as the United States rebounds from the depths of the coronavirus recession.

“The potent cocktail of generous fiscal stimulus, warmer weather and greater immunization spread will trigger the strongest inflation the economy has seen in the spring,” wrote Mahir Rasheed of Oxford Economics in an analysis.

Even so, Rasheed said “things should calm down” and “the Fed will examine the surge in price pressures” by keeping interest rates close to zero percent.

Economists believe that a moderate and relatively stable level of inflation will help stimulate economic growth by gradually pushing up prices and wages. The Federal Reserve’s annual inflation target is 2%, as measured by the personal consumption expenditure price index minus food and energy.

Inflation has been below the Fed’s target range for decades, and Fed officials have expressed confidence that price hikes will subside before they get out of hand.

“We have averaged less than 2% inflation over the past 25 years,” said Fed Chairman Jerome Powell. a House panel in February.

“The dynamics of inflation change over time, but they don’t change instantly, so we don’t really see how an explosion of budget support or spending that doesn’t last for many years would actually change that inflation dynamic. “, did he declare. noted.

President BidenJoe Biden, Ambassador of Afghanistan on whether Afghans will trust the US President againThe business team at also expressed confidence that a brief surge in inflation would set in before the end of the year. under increasing pressure Republicans on the issue.

“It’s time for Biden to wake up from his liberal dream and realize that reckless spending has consequences, inflation is real and the US debt crisis is deepening. Inflation is rising and Americans deserve answers from Biden now, ”Sen. Rick Scott (R-Fla.) Said in a Friday statement.

As Biden and the Democrats led a $ 1.9 trillion stimulus bill through Congress, Republican lawmakers argued the measure would spur soaring inflation with the U.S. economy poised to explode this year. in any event. Republicans have also argued, however, that the the economy is too weak to handle the tax hikes proposed in Biden’s $ 2.5 trillion stimulus package, which could theoretically cool the economy if it started to overheat.


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