The Food Shippers of America Blog

Inflation Continues to Be Major Concern

by Staff, on Dec 11, 2022 10:28:15 PM


The Producer Price Index (PPI), a measure by the U.S. Bureau of Labor Statistics of what companies get for their products in the pipeline, increased 0.3% for the month and 7.4% from a year ago – the slowest 12-month pace since May 2021. A 38% surge in wholesale vegetable prices helped push the food index up by 3.3%, offsetting an identical 3.3% decline in energy costs.

PPI Index 12-10-22These are just a few observations by industry experts that can have an impact on food chains – and they also provide a relevant backdrop against current transportation trends in the food and beverage industry made by FTR Transportation Intelligence during a FSA webinar in October.

One of the most significant concerns of food shippers in recent months is that rising inflation and geopolitical uncertainty will negatively impact food chains in Q4 2022, according to the recent Food Shipper Supply Chain Visibility Report conducted in partnership with FSA and FourKites. In fact, a significant majority of food shipper respondents (75.3%) say they are “Concerned” or “Very Concerned” about rising inflation and geopolitical uncertainty and their impact on their supply chains. Download the Food Shipper Supply Chain Visibility Report.

Additional Economic Concerns and their Impact on Food Chains

Wholesale prices rose more than expected in November as food prices surged, dampening hopes that inflation could be headed lower, the Labor Department reported last Friday.

Markets are now turning their attention to the more closely watched Consumer Price Index, which is due from the U.S. Bureau of Labor Statistics this week. In addition, the Federal Reserve is expected to conclude a two-day meeting with an announcement on where interest rates are heading.

The hot inflation data keeps the Fed on track for another rate increase, likely a 0.5% hike that would push benchmark borrowing rates to a target range of 4.25%-4.5%. Policymakers have been pushing rates higher in an effort to quell stubborn inflation that has emerged over the past 18 months after being mostly dormant for more than a decade.

Also, wholesale trade inventories rose 0.5% in October, below the 0.8% estimate.

The market was most focused on the PPI report, though the consumer sentiment survey provided some optimism on the inflation front.

A Look at Consumer Goods

On the goods side, the index rose just 0.1%, a steep decline from its 0.6% October gain. That modest gain came despite a 38.1% acceleration in prices for fresh and dry vegetables. Prices increased across multiple food categories even as the gasoline index significantly fell, by 6%.

Many industry experts say the soaring food price index is likely an anomaly and not necessarily reflecting a change in trend.

The release of market data comes amid other signs that price increases were at least decelerating from a pace that had put inflation at its highest level in more than 40 years. However, the data Friday, which tends to be a leading indicator of underlying price pressures, shows that shaking off inflation could be a long slog.

A year ago, headline PPI rose 1% for the month and 10% on a 12-month basis.

This was the third month in a row that headline PPI increased 0.3%. On an annual basis, the increase represents a decline from the 11.7% peak hit in March, but is still well ahead of the pre-pandemic pace at least going back to 2010.

The increase came despite a 3.3% decline in final demand energy costs. That was offset by an identical 3.3% increase in the food index. The trade index rose 0.7%, while transportation and warehousing fell 0.9%.

Excluding food, energy and trade services, PPI increased 0.3% from a month ago and was up 4.9% on an annual basis, the lowest since April 2021.

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