DALLAS–Inflation at the wholesale level climbed 8.3%, year-over-year in August, the biggest annual gain since the Labor Department started recording the 12-month number in 2010, with one analyst saying he disagrees with the Fed that inflation will soon fade away.
The inflation numbers come at the same time the economy has hit a COVID recovery “lull,” according to Brian Turner, president and chief economist with Meridian Economics.
“Inflation has been stirring as the economy recovers from last year’s brief but intense coronavirus recession,” wrote Turner in his latest analysis. “Supply chain bottlenecks and a shortage of workers have pushed prices higher.”
Excluding volatile food and energy prices, so-called core producer prices rose 0.6% from July and 6.7% from a year earlier, noted Turner. Food prices were up 2.9% last month after falling in July.
Turner pointed out that over the past year, wholesale food prices have climbed 12.7%, including surges of 59.2% for beef and 43.5% for shortening and cooking oil. Energy prices rose 0.4% from July and are up 32.3% over the past year.
‘Pressure’ on Fed
“The economy’s brisk recovery appears to have hit a late summer lull as COVID-19′s highly contagious Delta variant discourages Americans from shopping in stores or going out to restaurants,” Turner stated.
Looking forward, Turner added, “This puts more pressure on Federal Reserve policy-makers to consider raising their benchmark overnight rate - this they have feared to do should it put breaks on the pace of economic growth. Yet, if they allow inflation to remain, it will dilute consumers' purchasing power and the pace of growth - having the same impact to growth that raising rates would have.
“Still, Fed policy-makers expect higher inflation will recede over the next few months. I must say that we disagree,” Turner stated.