Inflation as measured by the producer price index rose to 2.7% for the year ending in June, the Bureau of Labor Statistics reported Friday, some bad news for the Federal Reserve and President Joe Biden.
Economists had forecast a slight rise in inflation from 2.2% in May.
On a month-to-month basis, the producer price index increased by 0.2 percentage points, more than expected.
The producer price index report was preceded by a consumer price index update Thursday that showed inflation easing to 3%, the third straight CPI report showing inflation falling. The producer price index, which measures prices received by businesses and suppliers for their goods and services, is not as widely known as the CPI. But economists watch it for additional signs of price movements that may filter down to households.
“Yes, clearly, obviously, 3 (or as I call it, 2.5) good CPI reports in a row are encouraging,” Jennifer Lee, senior economist at BMO Capital Markets, wrote in a note on Friday’s report. “But still-hot price pressures at the producer level show that the Fed won’t be fully comfortable and confident to move just yet.”
The Fed wants inflation to run at 2%, so while there has been progress in bringing inflation down from its peak of about 9% in 2022, there is still a way to go for the central bank.
Inflation has played a major role in the coming election, shading voter perceptions about the economy and, in turn, Biden’s economic approval ratings. The White House has been working hard to highlight how, on balance, inflation has fallen since peaking in June 2022.
Voter disapproval of Biden’s handling of the economy has created a huge dent in his overall approval ratings, something Republicans and former President Donald Trump have seized upon in the lead-up to the election.
A RealClearPolitics aggregate of polling on economic approval shows that more than 58% of people disapprove of the way Biden is handling the economy, while just 39.7% say they approve of his economic stewardship.
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Still, the labor market has remained above water and unemployment low despite the headwinds with inflation and the Fed hiking interest rates to their highest level since the dot-com bubble of the early 2000s.
The economy added 206,000 jobs in June, and the unemployment rate rose 0.1 percentage points to 4.1%, the Bureau of Labor Statistics recently reported. While the unemployment rate has been trending up a bit in recent months, 4.1% is still a historically low rate.