The regular summary of wholesale inflation is usually a big yawn on Wall Street. But not now. One of the obstacles looming for the United States as it recovers from the coronavirus is a shortage of key commercial supplies. That makes it harder for companies to produce enough goods and services to keep up with growing demand.
The result: prices are rising and raising latent concerns about inflation. Read: Emerging US manufacturers grow faster as key ISM index hits 38-year high. If prices rise fast enough, it is thought, the Federal Reserve could be forced to raise interest rates much sooner than planned and make it more costly for consumers and businesses. borrow. Higher rates could also end a Wall Street DJIA, a + 0.52% stock boom. It might have sounded far-fetched last winter, but not anymore. Every key measure of inflation is rising again and the uptrend is expected to last into the summer. Faster economic growth in the United States is expected to put even greater pressure on prices. Read: The US gains 916,000 new jobs in March and signals a strengthening economy. Plus: Is the US Unemployment Rate Really 6%? Not even close The government‘s report on wholesale inflation, called the producer price index, is always the first barometer of prices that comes out each month. PPI data, to be released next Friday, is expected to rise 0.5% in March in what would be the third strong increase in a row. Such an increase would push the wholesale inflation rate in the last 12 months to 3.8%, a maximum of 10 years. See: MarketWatch Economic Calendar The wholesale inflation report has often been ignored by Wall Street because it does not show a strong relationship to the prices Americans pay for a variety of goods and services. its soundboard, the consumer price index and the PCE index, are also showing a steady increase in the cost of living. It is therefore certain that the entire report will attract great scrutiny. “Markets will pay more attention to PPI inflation, looking for signs of increasing pressure on prices,” Citibank economists wrote in a note to clients. Fed leaders argue that the looming burst of inflation will die out as the global economy returns to normal and critical commercial supplies become available more free of charge. See: A visual look at how an unfair pandemic has reshaped work and home. They may be right, but they could find themselves in an awkward position if prices continue to rise well above the Fed’s 2% target. “Expect inflation to exceed the Fed’s long-term average target of 2% soon and remain there for an extended period, ”said Joel Naroff of Naroff Economic Advisors.