Popular Economics
The Producer Price Index for final demand moved up 0.4 percent in August, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. On an unadjusted basis, the index for final demand increased 5.4 percent for the 12 months ended in August. BLS.gov
The FRED graph makes it painfully obvious just what illegal tariffs and wars are doing to wholesale prices and will be passed on to retail prices for finished goods in the years to come.
It means just that. Inflation at the wholesale level takes time to change retail (CPI) prices; maybe a long time. Inflation is a measure of the behavior of prices, and seldom do they point in a downward direction, unless there’s a surplus of supply, or a shrinking in demand due to job losses or too much debt, or, there’s an outright recession.
The slight drop in June/July 2025 was because of the 60-day cease fire, so we can imagine how settling the Iran war could improve inflation. But, alas, Trump is lying when he says the war is no big deal, as if choking off Middle East oil and gas supplies in definitely won’t matter.
Yet we know it could morph into an endless war that does great damage to world economies, as did the OPEC oil embargo of the 1970’s that turned into a decade of stagflation.
The current inflation surge is mainly in goods rather than the service sector—things rather than services. The index for final demand goods (such as computers and chips) advanced 1.1 percent in August following two consecutive decreases (June-July). Over three-fourths of the broad-based rise can be attributed to energy prices, which moved up 4.2 percent.
But the Consumer Price Index was released the following day, in which the index for gasoline rose 3.9 percent in August, accounting for over one third of the monthly all items increase.
And we now must add in the additional tariffs on imported Canadian oil, steel, lumber and electrical goods, which makes it even more likely the Fed will raise interest rates this month. But that won’t help in the near term.
In attempting to squeeze Iran’s economy with the Strait of Hormuz blockade Trump and Iran are squeezing other economies as well!
It’s like two punch-drunk fighters in the ring with no one able to deliver the knockout punch.
This is in fact looking more like a repeat of the 1970’s stagflation when the U.S. was locked in a similarstruggle with OPEC, and inflation rose as high as 14 percent with two recessions plus two more in 1980-81 that were caused by the cure; raising the Fed’s own rates to 20 percent.
Do we want a repeat? I don’t think so. We are once again engaged in an endless war and seemingly endless inflation spiral unless Republicans join Democrats to stop the carnage.
Harlan Green © 2026
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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