US Producer Price Index Up 7.3% In June, Most In 11 Years - Labor Department

WASHINGTON (Pakistan Point News / Sputnik - 14th July, 2021) US producer prices rose by 7.3 percent in the year leading up to June, their most in 11 years, the Labor Department said Wednesday.

"The final demand index moved up 7.3 percent for the 12 months ended in June, the largest advance since 12-month data were first calculated in November 2010," the department said, referring to the so-called PPI, or Producer Price Index, which measures the average changes in prices received by domestic producers for their output.

Economists polled by US media had forecast a 6.7 percent year-on-year increase in June PPI, a benign rise from May's annual rise of 6.6 percent.

"The PPI data continues to show pipeline inflation which always has a potential of making its way into consumer prices," economist Adam Button said in a post on ForexLive.

US inflation will likely remain elevated in the near term before moderating, Federal Chairman Jerome Powell said Wednesday.

"Inflation has increased notably and will likely remain elevated in coming months before moderating. Inflation is being temporarily boosted by base effects, as the sharp pandemic-related price declines from last spring drop out of the 12-month calculation," Powell said in his prepared semi-annual testimony to Congress monetary policy.

The Fed chief said prices for services that were hard hit by the pandemic have also jumped in recent months as demand for these services has surged with the reopening of the economy.

"In addition, strong demand in sectors where production bottlenecks or other supply constraints have limited production has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind," Powell said

Commodity-fueled inflation has become a hot-button issue in the United States since vaccine breakthroughs for the COVID-19 in November unleashed price rallies in most raw materials amid forecasts for rapid economic recovery from the pandemic. Constraints in supply chains seeing explosive demand after months of lax activity have added to the upward price pressure in most commodities.

The White House said last week that monopoly by players in key US industries has also led to tripling mark-ups in prices of necessities such as prescription drugs, hearing aids and internet service.

The US economy shrank by 3.5 percent in 2020 due to lockdowns imposed by the COVID-19. Since the start of this year, growth has exceeded expectations, with a first-quarter expansion of 6.4 percent.