Prices of Materials Used by U.S. Businesses Rise Most Since 1974

Inflation is already in full bloom for U.S. manufacturers and many service providers.

A below-the-radar data point in the Labor Department’s producer price index report on Friday showed the sharpest monthly spike in processed goods for so-called intermediate demand since 1974. These are goods and materials such as ball bearings, fuel, chemicals, steel and plastics that are used to make other final-demand products like automobiles and household goods.

Such input costs jumped 4% in March from a month earlier, and climbed 12.5% from a year earlier, which was the most since 2008. The gains show industries from automakers and homebuilders to consumer-products makers and long-haul trucking firms are paying up for inputs.

Higher prices for these inputs have the potential of being passed on to consumers and businesses, a development that adds to the inflation saga.

Rising input prices reflect in part a strengthening of demand as the economy gets closer to putting the pandemic behind it. The Federal Reserve Bank of Chicago’s latest index of business conditions in the region, released Monday, surged in March on the heels of stronger manufacturing activity.

The survey also showed increased cost pressures, with 65% indicating higher materials prices, followed by 57% acknowledging more expensive shipping. Investors and data watchers will have another reading on price pressures Tuesday with the government’s March consumer price index report.

The latest PPI report contained a wide array of rising prices for processed materials. The following chart is a sample of intermediate-demand products with sizable monthly increases: