Wholesale prices rose more than expected in July, providing potential signs that inflation remains a threat to the US economy, a report from the Bureau of Labor Statistics showed Thursday.
The producer price index, which measures the price of final demand goods and services, jumped to 0.9% of the month, compared to Dow Jones’ estimates with a profit of 0.2%. This was the largest monthly increase since June 2022.
Excluding food and energy prices, Core PPI rose 0.3% to 0.9% against forecast. Excluding food, energy and trade services, the index rose 0.6%, the biggest profit since March 2022.
Each year, headline PPIs are up 3.3%, the biggest move in 12 months since February, far surpassing the Federal Reserve’s 2% inflation target.
Services inflation has increased most of the push, which rose 1.1% in July with its biggest profit since March 2022, with trade services margins rising 2%, coming amid the ongoing development of President Donald Trump’s tariff implementation.
Furthermore, 30% of the increase in services came from a 3.8% increase in machinery and equipment wholesale. Portfolio management fees also skyrocketed by 5.4%, while airline passenger services prices rose by 1%.
Stock market futures fell after release, but short term financial yields were higher.
PPI continues closer than BLS’s consumer price index, but provides important information on pipeline prices. The measure feeds into the Fed’s main inflation forecast gauge, the Commerce Department’s personal consumption expenditure price index. This will be updated later this month.
“The fact that the PPI is stronger than expected and the CPI is relatively soft suggests that businesses are eating much of the tariff fees rather than handing over to consumers,” said Clark Geranen, chief market strategist at Calbay Investments. “Companies will soon start to reverse courses and pass these costs to consumers.”
With CPI expected earlier this week, the market was priced the hypothetical certainty that the Fed would cut key interest rates the next September. Following the release, the market implementation odds for the September cuts fell, but only slightly decreased, according to CME Group’s FedWatch tool. Traders have significantly reduced the odds of three cuts this year.
“The massive surge in the producer price index this morning shows that inflation is running through the economy, even if consumers don’t feel it yet,” wrote Chris Zaccarelli, chief investment officer at Northlight Asset Management. “Given how benign CPI figures were on Tuesday, this is the most unwelcome surprise for the benefit, and could unleash some of the optimism of next month’s “guaranteed” rate reductions. ”
However, the White House said details in the report showed that the business had not passed the tariff charges for consumers.
The report occurs amid escalating questions regarding the accuracy of BLS data.
Trump fired the former BLS committee member earlier this month and said he intends to nominate Heritage Foundation economist Eji Antoni as deputy director of the department. Antoni is a BLS critic and even came to the idea of suspending monthly non-farm pay reports until data is better accurate.
BLS is being hampered by budget cuts and layoffs that have been forced to change the way data is collected. The July PPI report was the first since the department removed roughly 350 categories from a thorough number of input costs.
