PPI for final demand foods, 1-month percent change, January 2022. (Source: U.S. Bureau of Labor Statistics, Feb. 15, 2022)
On the heels of last week’s consumer price index (CPI) data showing a hot environment for inflation, the U.S. Department of Labor released its latest producer price index (PPI) report that reveals an even higher-than-anticipated jump in wholesale inflation.
According to the Bureau of Labor Statistics, the PPI rose a whole percentage point (1%) from December, double of the expected increase of 0.5%. On a yearly basis, the PPI is up 9.7% from January 2021.
That steep increase was driven by higher prices for final demand services like healthcare outpatient services and truck transportation for freight and for final demand goods, which ticked up 1.3% in January after declining 0.1% in December.
In areas with implications for grocers, the PPI for final demand foods edged up 1.6% for the latest one-month period after falling 0.3% from November to December. Higher food PPIs were led by beef and veal, dairy products, oilseeds, shortening and cooking oils and soft drinks. Costs related to the transportation of retail goods also rose, including diesel fuel and gasoline.
While some analysts claim that inflation is peaking, others voiced concern that further increases could be coming. Either way, the higher CPI and PPI figures have put greater pressure on the Biden Administration and the Federal Reserve to take more aggressive steps to curb inflation, as food manufacturers and retailers must weigh passing on higher costs to consumers.
In response to the new PPI figures, the Consumer Brands Association released a statement. “Wholesale costs have skyrocketed in the last year and with another near-record high this month, we need to be asking not when it will end but how the end be facilitated through smart policy,” declared CPA president and CEO Geoff Freeman. “There is no quick fix for issues plaguing the supply chain, particularly an economy-wide labor shortage — the government needs to engage on impactful solutions to turn down the pressure. Our industry has real concerns about filling workforce gaps and invites the opportunity to meet with the administration to discuss the challenges they are facing.”