Inflation Is Spreading Broadly into the Economy. Amid Surging Costs, Companies Raise Prices, and Customers Pay them, Despite Weak Economy, 10 Million Missing Jobs | Wolf Street

The signs of inflation building up in the economy are now everywhere. IHS Markit, in its release of the Flash PMI with data from companies in the services and manufacturing sectors, added to that pile of evidence.

Food inflation – which the Fed ignores in its core PCE inflation measure – is off to a good start. Prices for wheat, corn, and soybeans have spiked to levels not seen in over six years amid strong export demand from China and low US stockpiles. Rising prices of agricultural commodities raise the input costs for food producers, which are already passing on those costs in form of higher retail prices for consumers.

“Lumber shortages are starting to bite: 31% of contractors report a current lumber/wood shortage, up from 11% last quarter,” according to the Q4 2020 US Chamber of Commerce Commercial Construction Index. More broadly, 71% of contractors reported some shortage in building products and materials, up from 54% in Q3, particularly steel, electrical products other than copper wire, and lighting products. Contractors also reported a skilled labor shortage, with 83% reporting “moderate to high levels of difficulty in finding skilled workers.”

Inflation Is Spreading Broadly into the Economy. Amid Surging Costs, Companies Raise Prices, and Customers Pay them, Despite Weak Economy, 10 Million Missing Jobs | Wolf Street