July Producer Price Index Surges 0.9%, Exceeding Expectations
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belter
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Summary
The producer price index (PPI) rose 0.9% in July, significantly exceeding the expected 0.2% increase. This unexpected rise impacted stock market futures and Treasury yields. The PPI, though less followed than the consumer price index (CPI), provides crucial insights into pipeline prices and influences the Federal Reserve's primary inflation forecasting gauge. Businesses appear to be absorbing tariff costs rather than passing them onto consumers, as indicated by the disparity between PPI and CPI trends.
Key quotes
· 3 pulledThe fact that PPI was stronger-than-expected and CPI has been relatively soft suggests that businesses are eating much of the tariff costs instead of passing them onto the consumer.
Stock market futures fell following the release, while shorter-duration Treasury yields moved higher.
Together, the measures feed into the Commerce Department's personal consumption expenditures price index, the Fed's primary inflation forecasting gauge.
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