Producer Prices Rise

Producer prices in the United States surged significantly in October, owing to rising costs for gasoline and motor vehicle retailing, implying that high inflation may linger for some time due to the pandemic's tight supply chains.

"The acceleration in U.S. inflation may not fade as quickly as previously thought, particularly for businesses because of the global supply-chain issues," Ryan Sweet, senior economist at Moody's Analytics

According to the Labor Department, the producer price index for final demand gained 0.6 percent last month after rising 0.5 percent in September. The PPI grew 8.6 percent in the year to October, following a similar gain in September.

Europe's Growth May Wane

Labor productivity growth in the Eurozone soared at the start of the millennium as businesses rushed to adopt digital technologies, but many of the gains are at risk of eroding, according to a research released by the European Central Bank.

  • For years, Europe's productivity growth has been anemic, limiting overall economic expansion, and some analysts thought that the COVID-19 pandemic's silver lining would be a speedy adoption of digital solutions
  • According to the ECB in an Economic Bulletin article, labor productivity is now more than 2% higher than it was in the fourth quarter of 2019, even if it has fallen somewhat since the start of the recovery

Yet, unlike previous crises, the pandemic has not yet resulted in a mass exodus of low-productivity businesses, as government guarantees have kept businesses afloat, preventing what is normally a "creative destruction" process, according to the ECB. It's also possible that the shift of labor to more productive industries will reverse.

As a result of the containment measures, many face-to-face interactions, usually low-productivity jobs, were halted, and activity was shifted, accounting for 30 percent to 40 percent of labor productivity gains, according to the ECB.

Lockdowns may have disrupted education and training, and present supply chain bottlenecks may drive businesses to seek out new suppliers and supply routes, lowering productivity.


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