Prices paid to US producers quickened in July to the fastest monthly pace in three years, a sign tariffs are contributing to cost pressures in the supply chain.
The producer price index (PPI) rose 3.3pc for the 12 months ended in July, accelerating from 2.3pc in June, according to the Bureau of Labor Statistics. Analysts surveyed by Trading Economics had forecast a gain of 2.9pc.
On a monthly basis, PPI rose by a seasonally adjusted 0.9pc in July, up from 0.0pc in June and compared with a 0.4pc monthly gain in May. It was the fastest monthly pace since early 2022, when US headline inflation surged, prompting the Federal Reserve to increase its target rate to the highest in more than two decades.
"The surge in producer prices … indicates that the new tariffs are continuing to generate cost pressures in the supply chain, which consumers will shoulder soon," according to a note from Pantheon Macroeconomics.
PPI for services rose by a monthly 1.1pc, the largest gain since March 2022, after a 0.1pc decline in June. Over half of the July increase in services is attributable to a 2pc monthly gain in final demand trade services. That reflects the difference between the prices "paid by retailers and wholesalers to acquire goods and their selling prices," Pantheon said.
The PPI report follows a consumer price index (CPI) report Tuesday that showed moderate gains in CPI in July. That report, following a very weak July employment report nearly two weeks earlier, prompted futures markets to give a high likelihood of a Fed rate cut in September. The PPI report Thursday pares those odds somewhat. Traders will be closely watching labor and inflation data over the next month ahead of the next Fed meeting on 16-17 September.
Core PPI, which strips out volatile food and energy, rose by an annual 3.7pc in July compared with 2.6pc annual growth in June.
PPI for services rose by an annual 4pc in July, accounting for two thirds of PPI since December, following a gain of 2.7pc in June, BLS reported.
PPI for goods, with a weighting of about a third of PPI since December, rose by an annual 1.9pc in July, following 1.7pc in June.
PPI for energy fell by an annual 3.2pc in July.
