U.S. Producer Prices Post The Biggest Annual Gain In More Than 10.5 Years

• S. producer prices accelerated in June leading to the largest annual increase in more than 10.5 years. Based on the producer price index (PPI), prices increased by 7.3% YoY. This increase in inflation is attributed to two main factors. Firstly, it is due to a surge in demand fueled by the U.S economy’s recovery from the COVID-19 pandemic. Secondly, there have been supply-side issues such as increases in both commodity prices and labour costs. 
• Chris Low, chief economist at FHN Financial in New York stated that "Producers are still struggling to meet robust consumer demand in the face of supply chain bottlenecks and re-staffing difficulties." Further, it was highlighted that were very low inventory levels because of supply chain issues making it easier for producers to pass on the costs to consumers. 
• The Federal Reserve Chair Jerome Powell insisted in a congressional hearing that the high inflation is transitory, and this view is shared by most economists at the White House. However, given the high increase in producer price inflation coupled with the recent announcement of an increase in consumer prices, there is skepticism that inflation is temporary in the U.S.

(Source: Reuters)