The latest numbers from the Producer Price Index show costs rose sharply for producers and manufacturers last month.
It’s a potential sign that higher prices could soon trickle down to American consumers in the months ahead, as the prices that businesses pay for the stuff we buy are heating up.
The PPI, which measures the average change in prices paid by producers over time, jumped 0.9% from June, lifting the annual rate to 3.3%, according to Bureau of Labor Statistics data.
“In today’s data, it looks like wholesale manufacturers on things like machinery are really struggling with tariffs. And so, it’s going to be that kind of detail going forward that’s going to help us determine where prices are getting higher,” said Madison Mills, senior markets reporter with Axios.
Thursday’s readings far exceeded economists’ expectations for prices rising by just 0.2% in July and 2.4% annually.
Earlier this week, the Consumer Price Index for July showed that falling gas prices limited the average prices consumers were paying overall, but that goods affected by tariffs kept getting more expensive.
“The CPI print that you mentioned, that’s more backward-looking than this data. This tells us how producers, how companies are thinking about pricing going forward, so it’s more of that forward-looking data, and it’s painting a picture of prices going up,” Mills explained.
Ultimately, economists believe businesses will have to make a decision whether to pass down the increased costs they’re facing to the American consumer.
It’s a decision Stew Leonard Jr., president and CEO of Stew Leonard Grocery Stores, says he struggles with.
“The retailers don’t want to raise prices. We’re sometimes getting choked a little bit by what we are allowed to buy it at and what we have to retail it at in the store,” Leonard said.
The port of Los Angeles also reported moving more than one million containers in July for the best month on record -- a potential sign that businesses were bringing in more product in anticipation of President Donald Trump’s reciprocal tariffs deadline at the beginning of August.
The head of the port of LA believes the rest of the year will return to normal levels after this surge.