US businesses’ costs are swelling at a record pace, adding fuel to the inflationary fire burning across the pond, reveal official figures released today.
Prices for materials used by American firms are 9.7 per cent higher than were a year ago, the highest calendar year increase since the US Bureau of Labor Statistics started tracking the data in 2010.
Rising business costs adds to the likelihood of US inflation climbing even higher in the coming months.
American consumer price inflation hit seven per cent in December, the hottest print since 1982, figures released yesterday revealed.
Higher prices for raw materials is likely to strengthen incentives for businesses to raise prices in a bid to protect their margins and remain profitable.
Wholesalers lifting prices was the main factor driving businesses’ costs higher.
Separate data published today indicated the labour squeeze that is choking the US recovery is persisting.
Weekly jobless claims in the US climbed 23,000 over the last week to 230,000. A resurgence in Covid-19 cases ignited by the Omicron variant sweeping across the country has fuelled Americans’ reticence to re-enter the labour market, some analysts argue.
Uncertainty over the blow the new strain could deal to the US economy is weighing on business confidence, prompting firms to rein in hiring activity until the situation is clearer.
However, jobless claims have tumbled from their pandemic peak.
Shrinking labour market slack, defined as the number of unemployed workers, compounded by inflationary pressures persisting has driven economists to bet on the US Federal Reserve to launch a rate hike spree this year.
Investment banking giant Goldman Sachs and consultancy Capital Economics reckon the Fed will hoist interest rates at least four times this year.
A few months ago, most economists were not pencilling in any rate hikes until 2023.