Producer prices increased 9.6% for the year ending in November, marking it the fastest pace on record, according to a report on producer costs by the Bureau of Labor Statistics.
The high numbers in Tuesday’s producer price index report eclipsed predictions by forecasters and were the highest in the gauge’s 11-year history. The numbers signaled that inflationary pressures are even worse than most economists think. The news came just days after a report for the month of November found that consumer prices increased at the fastest annual rate in 39 years.
INFLATION RISES TO 6.8% IN NOVEMBER, HIGHEST IN 39 YEARS
Energy prices rose the most in the PPI report for final demand products, which is in line with a global energy crisis that has sent the cost of energy through the roof. The higher inflation has begun to worry some in the Federal Reserve, which has said all year that the higher prices were merely transitory and would settle back down.
“Wholesale inflation is high at the end of 2021 but is likely peaking,” said PNC Financial Services Group Chief Economist Gus Faucher. “Energy prices have been a big contributor to PPI inflation in 2021, but they have come down in recent weeks because of concerns about the omicron variant and increased production; there will be smaller increases in goods PPIs in December as a result, although they are still likely to accelerate on a year-ago basis for the next couple of months before beginning to decline.”
Fed Chairman Jerome Powell recently signaled during a congressional hearing that the central bank might be inclined to taper its multibillion-dollar asset purchases sooner than initially intended. The Fed is set to meet this week to discuss its tapering process. The central bank could announce it will taper at a more aggressive pace to pare back inflation.
“Price metrics have been running well above target for much longer than anticipated,” said Rubeela Farooqi, chief U.S. economist for High Frequency Economics, following the release of Tuesday’s numbers. “These data support the Fed’s switch to a faster taper that will likely precede a quicker tightening of policy next year.”
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The economy has been heating up for months after the Biden administration passed massive spending packages designed to help the United States recover from the COVID-19 pandemic. The pandemic has also caused massive supply chain snarls, further exacerbating inflation.
