Producer prices in the U.S. increased by 0.9% in July, exceeding expectations and indicating a larger inflation trend influenced by tariffs. The annual increase in the Producer Price Index (PPI) rose to 3.3%, up from 2.4%, along with core PPI rising to 3.7%. This unexpected rise in prices has triggered caution regarding the anticipated Federal Reserve rate cut in September. Despite a stable S&P 500 near its highs, increased bond yields signal potential inflation repercussions as companies confront rising production costs.
"U.S. producer prices surged 0.9% m/m in July, far exceeding expectations of 0.2% and marking the largest monthly gain since June 2022. On an annual basis, PPI rose 3.3%, up from 2.4% in June, while core PPI jumped to 3.7% from 2.6%. The data shattered forecasts across the board, underscoring the inflationary impact of recent tariff policy and justifying Fed caution regarding rate cuts," George Vessey of Convera told clients this morning.
"Supply chains have become longer and more complex—trade taxes progress down supply chains over months, not days," UBS warned this morning.
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