Bidenflation: Supply Chain Inflation Rockets to 23.9%, Final Demand at Record 8.6%

President Joe Biden claps during a clean car event Thursday, August 5, 2021 on the South Lawn of the White House. (Official White House Photo by Cameron Smith)
White House Photo / Cameron Smith

A key measure of inflation jumped 8.6 percent in September compared to a year ago, the largest advance since the Labor Department began calculating annual changes in producer prices under the current system in 2010. And a measure of inflation further out in the supply chain jumped 23.9 percent compared with a year ago.

The Producer Price Index for final demand rose 0.5 percent in September, a slowdown after the 0.7 percent gain in August. Compared with a year ago, the Producer Price Index is up 8.6 percent, higher than the 8.3 percent rise reported a month ago.

Prices for materials for durable goods manufacturing rose 1.9 percent for the month and are up a shocking 53 percent year over year. Components rose 0.8 percent on a monthly basis and are up 7.9 percent annually.

The Producer Price Index looks at inflation from the point of view of businesses, measuring prices received by sellers. The “final demand” index tracks goods and services sold to end-users in households, businesses, government, and as exports. In the past, the index was misleadingly called the “wholesale index” and many establishment media organizations continue to describe it incorrectly.

PPI also tracks prices paid higher up in the supply chain, measuring costs paid by businesses for components, materials, and services that go into products and services they sell to consumers and other businesses. These so-called “intermediate demand” prices show even more inflation right now.

Prices of processed goods for intermediate demand jumped 1.3 percent in September and they are up 23.9 percent compared with a year ago.

 Prices of unprocessed goods for intermediate demand rose 2.4 percent in September and they are up 45.9 percent from a year ago. Much of the September price gain was due to higher energy and food costs. Take those out, and unprocessed goods costs fell 3.5 percent for the month.

Services for intermediate demand rose 0.5 percent in September and prices are up 8 percent year over year. The Department of Labor said that an increase in the prices of business loans was a major factor in the September rise in prices for services for intermediate demand.

The intermediate demand indexes get even more granular, opening a view into how prices are flowing through the production process at four different stages. Stage four is the final step of intermediate demand, just before a product is sold on to its end-user. The third stage sells to the fourth, the second to the third, and the first the second.

Prices for stage 4 intermediate demand rose 0.4 percent in September following a 0.8-percent increase in August. Prices of goods inputs to stage 4 climbed 0.5 percent, and prices for total services inputs moved up 0.4 percent.  Compared with 12 months earlier, prices for stage 4 intermediate demand goods and services rose 11.6 percent.

Look out to stage 3 and prices moved up 1.0 percent in September, the same as in August, with inputs to goods up 1.2 percent and inputs to services up 0.8 percent. For the 12 months ended in September, prices for stage 3 intermediate demand advanced 20.2 percent.

Stage 2 prices rose 2.5 percent in September, the sixth consecutive increase. Goods inputs jumped 4.0 percent, and prices for services inputs climbed 1.1 percent. Compared with a year ago, stage 2 prices were up 22.7 percent.

Prices for stage 1 intermediate demand moved up 0.2 percent in September following a 0.9-percent increase in August. The index tracking inputs
to stage 1 rose 0.9 percent but services inputs fell 0.5 percent. Compared with a year ago, stage 1 prices are up 19.9 percent. The decline in services inputs appears to reflect a decline in demand for passenger airline services as the public once again shunned leisure travel as the Delta variant surged.

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