Gasoline puts pressure on US producer prices

Producer prices in the United States increased in October, driven mainly by gasoline prices, suggesting that inflation may be reluctant to recede in the short term.

The Producer Price Index for final demand (PPI) rose 0.6% last month after rising 0.5% in September, according to figures released Tuesday by the Labor Department.

In the last 12 months ending in October, the PPI increased 8.6%, an increase identical to that of September.

The observed figures are very close to what the market expected. Economists consulted by Reuters predicted an increase in the PPI of 0.6% monthly and 8.7% annually.

“The acceleration in US inflation may not fade as quickly as previously thought, particularly for businesses due to global supply chain problems,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania.

“Inflation is increasing pressure on the Federal Reserve, but they have shown no signs of abating as they will withstand higher inflation to bring the labor market back to full employment quickly,” he added.

With a rise of 6.7%, gasoline prices accounted for a third of the increase in the prices of final demand goods. Indices for diesel fuel, fresh and dried vegetables, jet fuel, and resins and plastics also rose.

Prices under the magnifying glass

Currently, monetary authorities around the world are observing this and other data to see if inflation is a transitory phenomenon derived from the economic recovery after the Covid-19 pandemic or if it is an effect that they must combat more actively with more aggressive monetary policies. .

At the end of October, annual inflation in the United States stood at 5.4%, well above the Fed’s goal of 2 percent. Treasury Secretary Janet Yellen said recently that she still sees inflation as a temporary result of severe supply chain bottlenecks, and expects price increases to normalize during 2022.

However, world food prices rose sharply in October, reaching levels they had not reached since July 2011, according to the Food and Agriculture Organization of the United Nations. Cereals, for example, register a 22.4% increase from their level a year ago.

Europe must prepare for higher inflation

Eurozone inflation is likely to fall below 2% again by the end of 2022, but the European Central Bank (ECB) should prepare for a less benign scenario, avoiding long-term political commitments due to upside risks. said the president of the Dutch central bank Klaas Knot yesterday.

Inflation in the euro zone hit 4.1% last month, far from the ECB’s 2% annual target. Despite this, the bank has rejected a stricter policy, arguing that there are transitory forces behind it and that the increase in prices will be reversed in the coming years.

“The medium-term outlook for inflation remains subdued and therefore it is highly unlikely that these conditions will be met next year,” ECB President Christine Lagarde said recently.

In Europe, inflation has been largely explained by the increase in natural gas prices, which has made household gas and electricity bills more expensive.

Some countries implemented measures to support companies and families in the most vulnerable situation, but always under the argument that they are temporary measures.

Knot also defended “largely transitory” price pressures, but cautioned that some temporary factors may be longer-lasting than previously thought.

Although the discourse of the transience of accelerated inflation is still being tested, some central banks are already anticipating and have begun to gradually raise their interest rates, such as Brazil, Chile, Colombia, Norway, New Zealand, Peru and Peru. Poland.

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