The Producer Price Index for final demand rose 0.9 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in June and moved up 0.4 percent in May. BLS.gov
The Trump administration wants Americans to believe the current inflationary surge is temporary. Why? Because it needs the Fed to lower interest rates to keep economic growth from stalling because of the tariffs. And lowering interest rates in what is still a fully-employed economy is inflationary.
It’s the kind of reverse logic that has characterized so much of the MAGA crowd that wants to believe conspiracies (Epstein?) rather than economic realities.
The Producer Price Index of wholesale goods just out is another unwelcome fact that inflation isn’t temporary because of the tariffs. The tariffs paid by American importers at ports of entry are already showing up in the prices of raw materials producers must pay that will ultimately be passed on to American consumers and businesses.
The PPI is showing July wholesale prices (dark red line) have risen much faster than retail prices (light red line) in the above FRED graph—3.3% vs. 2.7% in a year.
Coffee prices are already up 15%, for instance. Could that have to do with the 50% tariff Trump has levied on Brazil, a major coffee grower, because he doesn’t like its socialist government?
So an unfavorable PPI is another measure of inflation the Trump administration will want to ‘cook’ if their choice for a new head of the Bureau of Labor Statistics is confirmed by the Senate.
It prices the raw materials and services that go into the retail CPI Index that measures the final consumption of finished products and services. That’s no surprise because material input costs have been rising since April 2 and the announcement of the tariff wars, which belies Trump’s lies that the countries exporting to us will bear the cost of those import taxes for the great privilege of selling to US, yet are ultimately paid by Americans!
All eyes are now on what Fed Chair Powell will say at the Kansas Fed’s Jackson Hole conference this week. Will the 12 Fed Governors that vote at the FOMC meetings decide once again that there is little likelihood of an interest rate cut in September?
They may have to, because the biggest rise in wholesale prices was in the service sector that powers almost two-thirds of consumer activities (leisure, travel, dining out, transportation, and construction).
The index for final demand services moved up 1.1 percent in July, the largest advance since rising 1.3 percent in March 2022. It showed importers are also increasing their profit margins and so passing on the increased costs to consumers and businesses.
Over half of the broad-based July increase is attributable to margins for final demand trade services, which
And consumers are beginning to notice, according to the University of Michigan’s consumer sentiment survey.
“Consumer sentiment fell back about 5% in August, declining for the first time in four months. This deterioration largely stems from rising worries about inflation. Buying conditions for durables plunged 14%, its lowest reading in a year, on the basis of high prices,” reports survey Director Joanne Hsu.
Though it hasn’t done much damage to retail sales just yet. Retail sales rose 0.5% last month following a nearly 1% increase in June, reports the Census Bureau.
Automobile sales rose for the second month in a row, said MarketWatch’s Jeffry Bartash. Car buyers have been buying vehicles for the past few months to once again avoid anticipated price increases in the coming months as tariffs take full effect.
So the damage is already being done by Donald Trump’s tariffs. Even grocery prices are soaring that depend on what is produced domestically. Now why would grocery prices also be increasing that aren’t taxed by tariffs? Could it be that there are fewer farm workers to harvest the crops this year?? The ICE folks could answer that question!
Harlan Green © 2025
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