Last month, in announcing Target's disappointing first-quarter earnings, Target COO John Mulligan cited the rising cost of moving goods across the country as a main reason why operating conditions had proved even tougher in the quarter than the company was anticipating.
Freight and transportation costs, Mulligan said, totaled "hundreds of millions of dollars higher than our already-elevated expectations" in the year's opening quarter.
On June 14, the Bureau of Labor Statistics put a fine point on Target's internal finding, reporting that prices to transport freight by truck raced up 25.8% in the 12 months ending in May. From April to May alone, truck transport prices jumped nearly 3%.
Meanwhile, prices for freight transportation by train and by plane each rose more than 11% vs. the year-ago period. The BLS noted that rising costs for transportation services were a key contributor to overall producer price inflation of 10.8% in May, a mark that—while still high—was down slightly for the second month in a row.
Month to month, final-demand wholesale prices rose 0.8% in May after climbing 0.4% in April and 1.6% in March.
Producer prices for final-demand foods were up 13% year over year in May, with eggs once again leading the way on the wholesale food inflation front: Wholesale egg prices rose nearly 185% over year-ago levels (with a month-over-month decline of 0.3%).
Wholesale prices for beef/veal and pork fell month-to-month and year-over-year, with beef prices down 14% on the year and pork prices down more than 5%. Chicken prices went the other way; a 4.6% month-to-month jump in producer prices for processed young chickens contributed to a year-over-year climb of 20.6%.
Additional food categories seeing large jumps in wholesale prices year over year:
- Fresh and dry vegetables, 41.7%
- Shortening and cooking oils, 33.2%
- Pasta products, 24.3%
- Dairy products, 20.1%
- Finfish and shellfish, 19%
- Fresh fruits, 18.5%
- Roasted coffee, 13.8%
On June 10, the BLS reported that consumer prices were up 8.6% year over year in May, more than making up for a 0.2 percentage-point drop in April. Inflation for food at home hit 11.9%, setting another 40-plus-year record. In comparison, average hourly earnings for private nonfarm employees in the U.S. rose 5.2% year over year.
"Out-of-control wholesale costs are the origin of pricing frustration rippling through the economy right now," said Geoff Freeman, CEO of the Consumer Brands Association, a CPG trade group, in a statement in response to the producer price report.
Continued shutdowns and slowdowns relating to the COVID-19 pandemic, as well as extreme weather, uncertainty surrounding the war in Ukraine, and export bans on wheat and palm oil from India and Indonesia, respectively, are hindering supply-chain recovery in the U.S., Consumer Brands claimed.
"This perfect storm is constraining supply and driving up costs, and we don’t know when it will end," stated Freeman.