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 Fed 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/decreased by 0.2%, more than expected.
The producer price index report was preceded by a consumer price index update Thursday that showed inflation easing to 3%. 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.
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 fallen since peaking in June 2022.
Voter disapproval with 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 the coming election.
A RealClearPolitics aggregate of polling on economic approval shows that more than 58% 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 a tenth of a percentage point 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.