WASHINGTON, Sept 10 (Reuters) - U.S. producer prices increased solidly in August, indicating that high inflation is likely to persist for a while, with supply chains remaining tight as the COVID-19 pandemic drags on.
The producer price index for final demand rose 0.7% last month, the Labor Department said on Friday. That followed two straight monthly increases of 1.0%. In the 12 months through August, the PPI accelerated 8.3%, the biggest year-on-year advance since November 2010, after surging 7.8% in July.
Economists polled by Reuters had forecast the PPI gaining 0.6% on a monthly basis and rising 8.2% year-on-year.
“Pandemic-inhibited supply will put upward pressure on prices through year end, but softer domestic demand will allow producer price inflation to gradually ease heading into the fall and 2022,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.
Though surveys from the Institute for Supply Management this month showed measures of prices paid by manufacturers and services industries fell significantly in August, they remained elevated. Factories and services providers still struggled to secure labor and raw materials, and faced logistics delays.
This was corroborated by the Federal Reserve’s Beige Book report on Wednesday compiled from information collected on or before Aug. 30 showing “contacts reported generally higher input prices but, as with labor, they were mostly concerned about getting the supplies they needed versus the price.”
Very low inventory levels because of the supply bottlenecks have allowed producers to easily pass on the higher costs to consumers. The Fed’s preferred inflation measure, the core personal consumption expenditures price index, increased 3.6% in the 12 months through July after a similar gain in June. (Reporting by Lucia Mutikani Editing by Chizu Nomiyama)