According to advance numbers released today by the Bureau of Labor Statistics, wholesale inflation spiked again across the United States. Last month, it jumped at the quickest clip of the last three years. Just in July the Producer Price Index (PPI) jumped 0.9% over June. This unexpected jump blew right through economists’ estimates that had only forecast a 0.2% increase.
That surprise spike brought the annual rate of the Producer Price Index to 3.3%. This new increase is more than three times the old estimate of only 2.4%. USDA’s bi-annual outlook report released on Thursday warns that increasing production costs will push prices higher to consumers over the next several months. Taken together, this trend points to a dramatic soon-to-be market reality.
Chris Rupkey, chief economist at FwdBonds, had this to say about what this report means. He stated, “Today’s PPI report is the final confirmation that inflation is heading our way. The inflation simmering on the back burner has been brought forward and is clearly starting to boil.”
Rupkey highlighted the factors contributing to this inflationary trend, noting, “Tariff churn is starting to burn and producers are starting to feel the inflation fire heat.” His point further highlights worries that even inflationary production costs could trigger price hikes throughout the economy.
As an important leading indicator for consumer pricing, the Producer Price Index will be these watchful eyes. It provides important information on the influence of changes in producer costs on retail prices. The significant deviation from economists’ predictions raises questions about the resilience of the economy and the potential for sustained inflationary pressures.