According to Labor Department figures issued on Thursday, inventories of producer products climbed by 9.7% in 2021. As far as calendar years go, this was the fastest growth ever recorded.
There has been a rise in final demand producer price index (PPI) by about 10 percent, according to the BLS, which analyses prices charged for goods and services that are not included in other items. Thus, the PPI has grown at its fastest annual rate since the Labor Department began keeping figures in 2010, as a result of this.
Despite this, the seasonally adjusted consumer price index (CPI) rose only 0.2% in December. Following a 1% jump in November, economists expected the Producer Price Index (PPI) to rise by 0.4% in December. The so-called “core PPI,” which excludes food, energy, and trade services, was expected to rise by 0.4% in December, according to economists’ expectations.
According to Mahir Rasheed, an American economist, “moderation in the monthly data supports our estimate that producer prices will steadily drop as 2022 continues, particularly in the second half of the year,” according to Oxford Economics.
Consumer and producer prices rose fast in 2021 due to an unexpectedly robust economic rebound, which put a strain on suppliers who were still recovering from the flu pandemic. Pandemic-related employment and supply shortfalls have made it difficult for many businesses and suppliers to meet the growing demand.
It is possible that inflation in consumer prices will begin to reduce notwithstanding the reduction in production price growth. On Wednesday, the Labor Department released data showing that consumer prices will climb by 7% in 2021. Since 1982, this has been the fastest annual growth rate.
According to some economists, improvements in industrial productivity and delivery times are evidence that the supply chain is becoming less clogged and that progress is being made. To further restrain inflation, the Federal Reserve expects to begin raising interest rates as early as March of next year.
As input costs decline, investors are looking for indicators that higher prices are putting less of a pressure on the supply chain and, therefore, on consumers. A Comerica Wealth Management executive says that “this could help define the scope of the Fed’s ambition to raise rates in 2022 and beyond.”