Wholesale prices in the U.S. jumped sharply in July, signaling inflation may still be a threat to the economy despite recent signs of cooling in consumer prices.
The Bureau of Labor Statistics said Thursday the producer price index (PPI) rose 0.9% for the month, far above the 0.2% increase economists had expected and the biggest monthly gain since June 2022. Core PPI, which strips out food and energy, also rose 0.9% versus a 0.3% forecast, while an even narrower measure excluding food, energy, and trade services climbed 0.6% – the largest since March 2022.
On an annual basis, headline PPI was up 3.3% – the biggest yearly rise since February and well above the Fed’s 2% target. Most of the increase came from the services sector, which saw prices jump 1.1% in July, with trade services margins up 2%. Machinery and equipment wholesaling surged 3.8%, portfolio management fees rose 5.4%, and airline passenger services gained 1%.
Analysts noted that tariffs under President Donald Trump’s trade policy may be contributing to the price pressures. CalBay Investments’ Clark Geranen said the data suggests businesses have been absorbing tariff costs but may soon pass them on to consumers.
The hotter-than-expected report knocked U.S. stock futures lower and pushed short-term Treasury yields higher. It also slightly reduced market expectations for a Federal Reserve rate cut in September, according to CME Group’s FedWatch tool, and lowered the chances of multiple cuts this year.
Northlight Asset Management’s Chris Zaccarelli called the jump in PPI “a most unwelcome surprise” given the mild CPI report earlier this week, warning it could dampen optimism about a near-certain rate cut next month.
The release also comes amid controversy over the accuracy of BLS data. Earlier this month, Trump fired the agency’s former commissioner and said he will nominate Heritage Foundation economist E.J. Antoni, a critic of the bureau, to lead it. The BLS has faced budget cuts and staff reductions that forced changes in data collection, including the elimination of 350 cost categories starting with the July report.
