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Producer Prices Surge to Largest 12-Month Increase on Record
The Bureau of Labor Statistics released the Producer Price Index report for July last week, citing increases of 1.0% in July versus 1.0% in June and 0.8% in May. The year-over-year increase was 7.8% – the largest 12-month increase since the numbers were first calculated in November 2010.
The largest component of the increase was services, which increased 1.1%. Final demand for goods increased 0.6%. The sectors hardest hit by the pandemic – autos, airlines, accommodations – had the largest gains. Supply pressures from goods like semiconductors and labor shortages for impacted industries created the most significant increases. We anticipate that some of these supply pressures will begin to dissipate in the coming months.
We believe that as the economy continues to expand – albeit more slowly -- and supply and labor pressures ease, price increases at the producer level will come down. Overall, looking at consumer price and producer price changes, even with the surge in June and July, we continue to feel that some of these increases are “transitory” and should ease with time.
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