U.S. producer prices in February reportedly soared and continued to strengthen the previous month. The surge was also influenced by the surge in prices of crude oil and other commodities following the war between Russia and Ukraine.
The producer price index (CPI) for final demand rose 0.8% after strengthening by 1.2% in January as reported by the Labor Department on Tuesday. In the 12 months to February, the CPI rose 10% after a similar increase in January.
On the other hand, economists forecast the CPI or PPI reading to be 0.9% in February and 10% in the year count. Waima so the data does not capture the spike in prices of oil and other commodities, such as wheat, following the Russian invasion of Ukraine took place on 24 February.
Inflation has surpassed the 2% target set by the Fed based on all available measures. U.S. central bank is expected to start raising interest rates on Wednesday. Economists predict as many as seven rate hikes this year.
Crude oil prices jumped more than 30%, with global benchmark Brent hitting a record high of $ 139 a barrel, the highest since 2008, before falling to trade below $ 100 a barrel on Tuesday.
Even with falling oil prices, inflation is likely to remain hot as the resurgence of the Covid-19 infection in China, where China is a major source of raw materials for U.S. plants, puts more pressure on the supply chain.
“U.S. inflation will pick up in the first half of this year and will almost certainly jump higher in the third quarter if not in the fourth quarter,” said Chris Low, chief economist at FHN Financial in New York.
The issue of inflation is not a new thing that arose during the Russo-Ukrainian war but even before that. High inflation, mostly in the form of more expensive petrol, has prompted economists to reduce their economic growth estimates this year. So far, an economic downturn is not expected as households still have savings.
In the 12 months to February, the core PPI increased 6.6% after gaining 6.8% in January.
