A new economic report is a major warning sign to American consumers.
US wholesale inflation surged unexpectedly last month, signaling that President Donald Trump’s sweeping taxes on imports are pushing costs higher.
The Labor Department reported on Thursday that its producer price index, which measures inflation before it reaches consumers, was up 0.9 percent from June and 3.3 percent from a year earlier.
Analysts typically use the metric as a predictor of incoming price hikes at retail and grocery stores. Economists predicted the number would be lower.
Thursday’s data signals that it is becoming more costly to do business in the US. Frequently, companies are forced to either hike prices or slash jobs to maintain their profits if their costs rise.
Thursday’s report comes two weeks after federal experts released a grim jobs report, showing the last three months of job creation were much lower than analysts expected.
Unemployment was also on the rise.
Companies have been sending out cost warnings for months: car companies like Ford and GM said they’re paying billions in tariffs, while retailers Target and Best Buy warned they would have to raise consumer prices on popular goods.
Thursday’s data turned stocks into the red, reversing a two-day upward trajectory for all three major indexes
But so far, those prices haven’t moved into the consumer economy.
On Tuesday, the Labor Department reported that consumer prices rose 2.7 percent last month from July 2024, same as the previous month and up from a post-pandemic low of 2.3 percent in April.
Core consumer prices rose 3.1 percent, up from 2.9 percent in June.
Both figures are above the Federal Reserve’s 2 percent target, but overall inflation was lower than investors expected.
At the time, Wall Street rushed to flush cash into the market. But on Thursday, stocks turned red in pre-market trading.
Nasdaq and S&P futures both fell by about 0.4 percent after the data release, reversing gains from the past two days.
A few metrics in the data have mild signs of hope for US consumers.
The new numbers suggest that slowing rent increases and cheaper gas are at least partly offsetting the impacts of Trump’s tariffs.
Many businesses are also likely still absorbing much of the cost of the duties instead of passing them along to customers via higher prices.
Economists also watch it because some of its components, notably measures of healthcare and financial services, flow into the Federal Reserve’s preferred inflation gauge – the personal consumption expenditures, or PCE, index.
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