Shipping and Warehousing Prices Soar as Supply Chain Chaos Lashes Economy

WASHINGTON, DC - OCTOBER 13: U.S. President Joe Biden speaks about supply chain bottlenecks in the East Room the White House October 13, 2021 in Washington, DC. With the holiday season approaching, President Biden announced that the Port of Los Angeles will begin to operate 24 hours a day in …
Photo by Drew Angerer/Getty Images

The costs of moving goods around the United States has soared over the past year, adding to the inflationary pressures that have sent consumer prices skyrocketing, data from the Department of Labor showed Thursday.

Businesses that arrange for the transportation of freight and cargo raised their prices 10.9 percent in September. Compared with a year ago, these logistics businesses now charge 71.77 percent more.

The price of transportation of finished products to households and businesses by truck rose 0.8 percent in September and is up 15 percent compared with one year ago, according to the Department of Labor’s Producer Price Index data.

Rail transportation of goods for final demand costs 6.8 percent more than a year ago after rising 0.4 percent in September. Air freight costs rose 2.3 percent in September and are now up 5.2 percent year over year.

Courrier, messenger, and postal service prices rose 2.6 percent in September and are now up 7.2 percent annually.

The Producer Price Index looks at inflation from the point of view of businesses, measuring prices received by sellers. In addition to “final demand” prices of goods and services sold to households, businesses, government, and as exports, PPI tracks prices paid higher up in the supply chain, measuring costs paid by businesses for components, materials, and services that go into products and services they sell to consumers and other businesses. These so-called “intermediate demand” prices show even more inflation right now.

The Producer Price Index for final demand rose 0.5 percent in September, a slowdown after the 0.7 percent gain in August. Compared with a year ago, the Producer Price Index is up 8.6 percent. Prices of processed goods for intermediate demand, on the other hand, jumped 1.3 percent in September and they are up 23.9 percent compared with a year ago.

Prices of unprocessed goods for intermediate demand rose 2.4 percent in September and they are up 45.9 percent from a year ago. Much of the September price gain was due to higher energy and food costs. Take those out, and unprocessed goods costs fell 3.5 percent for the month.

Services for intermediate demand rose 0.5 percent in September and prices are up 8 percent year over year. The Department of Labor said that an increase in the prices of business loans was a major factor in the September rise in prices for services for intermediate demand.

Prices of transportation and warehousing of goods for intermediate services jumped 2.4 percent in September, bringing the annual gain up to 12.9 percent. Transportation and warehousing of goods for manufacturing rose 0.8 percent and they are up 10.1 percent.

The intermediate demand indexes get even more granular, opening a view into how prices are flowing through the production process at four different stages. Stage four is the final step of intermediate demand, just before a product is sold on to its end user. The third stage sells to the fourth, the second to the third, and the first the second.

In the September PPI data, we see that the prices of transportation and warehousing for goods producers at the final intermediate stage rose 0.7 percent on a monthly basis and they are up 9.7 percent annually.  Services producers saw these prices rise 2.9 percent monthly and 9.7 percent annually.

A step further up the supply chain to stage three shows more pricing pressure. Warehousing and transportation costs for stage three goods producers rose 0.9 percent in September and are up 10.3 percent on an annual basis. For services producers, these prices rose 3.3 percent for the month are are up 15.5 percent for the year.

At stage two, the prices of transportation and warehousing for goods producers went up 1.1 percent in September and are up 7.4 percent compared with a year ago. Services producers saw a leap of 5.8 percent for the month and 32.8 percent for the year, very likely reflecting increases in the costs of storing and transporting fuel and chemicals.

At stage one, the beginning of the production process, the prices for goods producers rose 2.4 percent for the month and 8.3 percent for the year.  Services saw prices of transportation and warehousing climb 2.7 percent monthly and 10.8 percent annually.

The picture painted here is one of a stressed supply chain squeezing through freight and storage bottlenecks at every stage of production.


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