BIDINFLATION: Producer prices skyrocket as supply chain woes continue

On Tuesday, the US Bureau of Labor Statistics released its November statistics, marking the highest annual producer price index increase in a 12-month period since the data was first calculated in November 2010.

The index for final demand services rose 0.7 percent in November, and prices for final demand goods increased 1.2 percent.

For the 12 months ending in November, the final demand index rose 9.6 percent, "the largest advance since 12-month data were first calculated in November 2010," according to the US Bureau of Labor Statistics.

"For the 12 months ended in November, prices for final demand less foods, energy, and trade services increased 6.9 percent, the largest advance since 12-month data were first calculated in August 2014," the bureau noted.

Leading November's increase for final demand services was portfolio management, which rose 2.9 percent. Guestroom rental; securities brokerage, dealing, investment advice, and related services; fuels and lubricants retailing; airline passenger services; and transportation of freight and mail also rose during the month.

During that period, chemicals and allied products wholesaling fell 1.3 percent, and the indexes for furnishings wholesaling and for bundled wired telecommunications access services also fell.

Final demand goods rose 1.2 percent following a 1.3 percent jump in October. The bureau stated that the advances in the index were "broad-based."

Contributing to the rise was the prices for iron and steel scrap, which rose 10.7 percent. "The indexes for gasoline, fresh fruits and melons, fresh and dry vegetables, industrial chemicals, and jet fuel also moved higher," the bureau stated.

The prices for diesel fuel fell 2.6 percent, with the prices for processed young chickens and light motor trucks falling as well.

The price of processed goods increased by 1.5 percent in November, and 26.5 percent for the 12 months ending in November, marking the highest 12-month increase since December 1974, which jumped 28.9 percent.

Contributing to the rise in processed goods was the index for industrial chemicals, which rose 2.5 percent in November. Prices for utility natural gas, gasoline, electric power, fabricated structural metal products, and hot rolled steel sheet and strip also increased.

The prices for unprocessed goods for intermediate demand rose 4.8 percent in November, the eighth consecutive month of increase. For the 12-months period ending in November, the index for unprocessed goods for intermediate demand jumped 52.5 percent.

Most of the increase for unprocessed hoods was attributed to the 14.3 percent increase in natural gas. Prices for crude petroleum, grains, iron and steel, nonferrous metal ores, and fresh fruits and melons also rose.

According to the bureau, "The Producer Price Index (PPI) program measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services."

With the increase in producer prices, an economist told Reuters that the statistics would likely lead to Federal Reserve officials announcing a tapering of bond purchases and a raising of interest rates sooner than expected.

"Price metrics have been running well above target for much longer than anticipated," said Rubella Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. "These data support the Fed's switch to a faster taper that will likely precede a quicker tightening of policy next year."

The release of the PPI statistics follows the release of the bureau's Consumer Price Index on Friday, which revealed the highest annual increase of the index since 1982, in which it rose 7.1 percent.

In 2021, the CPI rose 6.8 percent in November from the year prior.