Cost index soars for consumers, producers
New information out Thursday from the federal government shows that the costs to make goods and provide services went up 11.3% in June. This comes on the heels of the Consumer Price Index out on Wednesday that shows the cost to consumers is up more than 9%. This week’s numbers indicate that inflation is going to continue to climb.
“Producer prices spiking means more pressure for businesses to pass these costs onto consumers,” said Paige Terryberry, fiscal policy analyst for the John Locke Foundation.
The PPI is released monthly by the U.S. Bureau of Labor and Statistics and measures wholesale inflation, the prices paid to 25,000 U.S. producers of goods and services. It is seen as a precursor to the rate consumers are paying, and an indicator of the trajectory of inflation.
According to the BLS report, there is one driving factor of the soaring rate.
“Over half of the June increase in the index for final demand goods is attributable to gasoline prices, which jumped 18.5 percent,” the report reads.
The PPI hit a record high back in March, with an 11.6 % jump. Currently, inflation and prices are at their highest point since 1981.
On Thursday stocks dropped on the news, with the Dow Jones Industrial Average tumbling 558 points at opening. Analysts are predicting that the Federal Reserve will have to raise interest rates by 75 base points at their July 27 meeting.
“Wages cannot keep up with inflation meaning real incomes are declining,” said Terryberry. “The alarm bells for a recession are certainly ringing.”