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Global Supply Chain Bottlenecks Keep Prices High

Global supply chain bottlenecks continue to keep producer prices around the United States high, signaling that high inflation is likely to continue for the rest of the year (and into the future). These supply chain issues, which have affected all communities globally, have continued to worsen, especially because the pandemic is ongoing. The Delta variant of COVID-19 has caused infections and cases to surge in the United States and around the world, just when many thought the pandemic was coming to an end. As a result of this surge, ports have continued to be congested, and global supply chain issues have only persisted.

Therefore, United States producer prices have increased in August, according to new data from the Labor Department. The producer price index for final demand rose about 0.7% last month, per new Labor Department data. The producer price index for final demand has increased for two straight months now. This increase in August is the biggest annual gain in about 11 years.

Consumer demand has continued to surge across the United States, even with the Delta variant consistently spreading to others. While there are some signs that hint the economy is slowing down now, businesses around the country have continued to do well. For example, while consumer demand has slowed when buying goods, the back-to-school season has still done quite well for many retailers. Back-to-school sales tend to hint at how holiday seasonal sales will do, so analysts feel quite optimistic that the end of the year will be good for many businesses.

However, elsewhere, the sales of goods have slowed down for the past few months. Instead, consumer demand has switched to spending more money on services, rather than goods. Often, services related to the travel or food industry have done the best. Many Americans, having not eaten out often or traveled in the last year because of the pandemic, have spent more money eating out or traveling around the country in the past few months.

There are signs that even this demand has slowed down a bit, though. As the Delta variant began to spread quickly in the last few weeks, many airline companies warned their investors that their quarter three sales may not reach the heights they had initially anticipated, as many consumers were canceling their plans. The Delta variant also resulted in low rates of bookings for airlines and hotels. 

Global supply chain bottlenecks have also consistently affected the overall inventory of so many businesses in the United States. Because it has become rather difficult to build up an inventory — because of high consumer demand and these supply chain issues — many businesses have an incredibly low inventory. New data also showed that the pace of inventory accumulation for businesses slowed in July. 

Therefore, consumer price inflation will likely remain high for the time being, especially because consumer demand doesn’t seem to be completely fading anytime soon (even if it is slowing down some). Supply chain bottlenecks have continued to intensify because of the ongoing pandemic, which has made matters rather difficult for so many businesses. Labor shortages around the nation also play a part in this higher inflation.

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