How hot is inflation running in the US? Record hot

Over the past twelve months, producer prices gained 9.6 percent in November – the biggest increase on records dating back to 2010.

Inflation in the United States continues to accelerate at a breakneck pace, with wholesale prices in November posting their biggest annual jump on record, government data showed on Tuesday.

The Producer Price Index, which measures prices businesses receive for their final goods and service, vaulted 0.8 percent in November from the previous month, the Bureau of Labor Statistics said.

During the past twelve months, producer prices gained 9.6 percent – the biggest increase on records dating back to 2010.

Strip out food and energy and the so-called “core” PPI galloped up 0.7 percent in November from October – the sharpest monthly jump since July. During the past 12 months, core PPI rose 6.9 percent, the largest increase on records dating back to August 2014.

Once again, prices of goods led the charge higher, but the data is signaling that a rotation in spending away from goods and back towards services may be under way.

Prices for final demand goods rose 1.2 percent in November – slightly slower than October’s 1.3 percent increase, while prices for final demand services jumped 0.7 percent last month after rising 0.2 percent in October.

Businesses have seen their costs skyrocket this year, thanks to supply chain bottlenecks, and shortages of raw materials and workers. At least some of those costs are being passed on to consumers in the form of higher prices.

Last month, consumer prices rose at their fastest pace in nearly 40 years.

Tuesday’s data will add to the growing body of inflation figures the US Federal Reserve will mull over as it kicks off its last two-day policy-setting meeting of the year on Tuesday.

Throughout most of this year, the Fed has prioritised getting Americans back to work over keeping a lid on inflation, believing that price pressures are a consequence of pandemic disruptions and will eventually ease next year.

While the Fed still holds the view that inflation will start to ebb midway in 2022, US workers are currently calling the shots in a labour market awash in a near-record number of job openings.

Fed chief Jerome Powell recently signalled that the Fed is shifting its priorities away from propping up the jobs market and back towards containing price pressures.

Powell told US lawmakers earlier this month that the Fed could accelerate its unwinding of bond purchases that have helped keep longer-term borrowing costs low. A faster tapering could prepare the ground for an inflation-cooling interest rate increase sooner than expected.