The Big Squeeze: Inflation soars 7.8%

U.S. producer price inflation soars 7.8% annually in July.

AP – U.S. producer prices increased more than expected in July, the Labor Department said on Thursday, suggesting inflation could remain high as strong demand fueled by the recovery continues to hurt supply chains. In the 12 months through July, the PPI jumped 7.8%, a record high since the measure was introduced in 2010.

The producer price index for final demand increased 1.0% last month after rising 1.0% in June. Three-quarters of the gain was driven by a record one-month increase in final demand services, while the goods advance was half what it was in June.

The report followed data on Wednesday that showed U.S. consumer prices increases slowed in July even as they remained at a 13-year high on a yearly basis amid tentative signs inflation has peaked as supply-chain disruptions caused by the pandemic work their way through the economy.

Companies big and small are raising wages to attract workers and hold onto employees as the economy revs back into gear. But those fatter paychecks aren’t going as far, thanks to rising inflation.

Compensation is now lower than it was in December 2019, when adjusted for inflation.

The Employment Cost Index — which measures wages and salaries, along with health, retirement and other benefits — fell in the last quarter and is 2% below its pre-pandemic trend, when taking inflation into account. (Wages and salaries are growing at a faster pace than benefits.)

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