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Friday brought further confirmation of rising inflation after the U.S. Department of Labor said its Producer Price Index (PPI) – which measures the prices companies get for the goods and services they sell – jumped 8.3% in August from a year earlier, the biggest advance since the data was first measured in November 2010.
If American consumers feel their dollar isn’t going as far as it used to be, there’s a good reason for it.
Because it is not.
Friday brought further confirmation of rising inflation after the U.S. Department of Labor said its Producer Price Index (PPI) – which measures the prices that businesses get for the goods and services they sell – jumped 8.3% in August from a year earlier.
This is the biggest breakthrough since the data was first measured in November 2010.
The August PPI rose 0.7 percent from the previous month, when producer prices rose 1 percent.
Inflation has become a hallmark of economic recoveries in the United States and around the world after COVID-19, as companies scale up operations in droves, triggering bottlenecks in the supply of raw materials. Labor shortages are also creating headaches for American businesses, many of which have had to raise wages or offer signing bonuses to attract workers.
July saw a record 10.9 million job vacancies in the United States.
Prices for final demand services rose 0.7% last month, marking the eighth consecutive increase.
Take away food and energy, which tend to be more volatile, and the so-called “core” PPI rose 0.3 in August after rising 0.9% in July.
During the year, basic producer prices rose 6.3% – the largest increase since the data was first calculated in 2014.
When prices rise for businesses, those costs are often passed on to consumers, whose spending accounts for about two-thirds of U.S. economic growth.
While a little inflation is good for an economy because it prompts consumers to buy goods and services now, rather than sitting on their wallets waiting for prices to drop, too much Inflation can be deeply destructive if it triggers a sharp rise in prices. spiral.
The big fear is that if inflation gets out of hand, it could prompt the US Federal Reserve to sharply raise interest rates and possibly derail the economic recovery.
But Federal Reserve Chairman Jerome Powell has repeatedly said that he and his fellow policymakers believe the current wave of rising prices is a temporary consequence of supply bottlenecks and that inflation will end. by moderating.
Inflation is also more severe for low-income households as it absorbs a larger share of their income, especially for basic necessities like food and gasoline.
The economic rebound hit a slowdown this summer as COVID-19 infections linked to the highly contagious Delta variant of the coronavirus increased in parts of the country.
On Wednesday, the Federal Reserve said economic activity in the United States had “slowed” in July and August. Last month, the economy added a paltry 235,000 jobs – the slowest pace of job creation since January and a dramatic slowdown from the previous month.
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