WASHINGTON (AP) — U.S. wholesale inflation surged unexpectedly last month, signaling that President Donald Trump’s sweeping taxes on imports are pushing costs up and that higher prices may be headed toward consumers.
The Labor Department reported Thursday that its producer price index — which measures inflation before it hits consumers— rose 0.9% last month from June, biggest jump in more than three years. Compared with a year earlier, wholesale prices rose 3.3%,
The numbers were much higher than economists had expected.
Prices rose faster for producers than consumers last month, suggesting that U.S. importers may, for now, be eating the cost of Trump’s tariffs rather than passing them on to customers.
That may not last.
“It will only be a matter of time before producers pass their higher tariff-related costs onto the backs of inflation-weary consumers,” wrote Christopher Rupkey, chief economist at fwdbonds, a financial markets research firm.
Excluding volatile food and energy prices, so-called core producer prices rose 0.9% from June, biggest month-over-month jump since March 2022. Compared with a year ago, core wholesale prices rose 3.7% after posting a 2.6% year-over-year jump in June.
The wholesale inflation report two days after the Labor Department reported that consumer prices rose 2.7% last month from July 2024, same as the previous month and up from a post-pandemic low of 2.3% in April. Core consumer prices rose 3.1%, up from 2.9% in June. Both figures are above the Federal Reserve’s 2% target.
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.
Wholesale prices can offer an early look at where consumer inflation might be headed. Economists also watch it because some of its components, notably measures of health care and financial services, flow into the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures, or PCE, index.
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