July Producer Prices Jump at Fastest Pace in 3 Years Amid Tariff Cost Concerns

10:56 AM EDT, 08/14/2025 (MT Newswires) -- US producer prices rose at the fastest pace in about three years last month, Bureau of Labor Statistics data showed Thursday, potentially fueling worries that tariffs could heat up inflationary pressures in the coming months.

The producer price index rose 0.9% on a seasonally adjusted basis in July, after holding steady the month before, according to the BLS. The latest print marks the biggest month-on-month increase since June 2022. A survey compiled by Bloomberg pointed to a gain of 0.2%.

Annually, wholesale cost growth accelerated to 3.3% in July, the fastest in five months and ahead of analysts' estimate for a 2.5% rise.

The PPI report follows Tuesday's data showing that consumer inflation in the world's largest economy slowed down last month on a sequential basis, with analysts saying earlier this week that businesses have yet to fully pass through tariff-related costs to consumers.

Trends from the PPI report are "a little difficult to ignore," Jennifer Lee, senior economist at BMO, said in a note on Thursday. "This captures the costs at the producer level, which could theoretically flow through to the consumer, unless producers are willing to eat all of the costs (tariffs), which is doubtful."

Following Tuesday's CPI data, markets moved to widely expect a 25-basis-point rate cut by the Federal Reserve next month, with some even betting on a bigger, 50-basis-point reduction. Those expectations for a larger cut have now been reversed, though the market is still predicting the Fed to lower rates by a quarter percentage point in September, according to the CME FedWatch tool.

"Though there will be questions raised about the validity of the (PPI) data, this emboldens those who are less dovish on the Fed that a September cut is not a done deal," BMO's Lee said.

Services led the sequential PPI increase in July, rising 1.1% after a 0.1% drop in June, the BLS data showed. The final demand goods component increased 0.7%. Food prices within the goods category jumped 1.4%, the fastest in five months, while energy costs gained 0.9%.

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