Businesses Costs Increased Strongly in July
The U.S. Producer Price Index (PPI) increased by 3.3 percent since last July according to this month’s BLS report, a rate that could herald higher inflation in the future.
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PPI measures the total cost of goods and services to businesses, rather than to consumers. A high PPI means that input costs for producers are increasing, a situation that usually leads to higher prices for consumers (and thus higher inflation) in the future. When PPI increases faster than inflation, as it did in July, business costs are increasing faster than prices, denting profits.
The July increase is the highest since June 2022, and could signal trouble for the economy. The statistic is also troubling for the Trump administration, which has been pushing to lower interest rates at the Federal Reserve, something the central bank will be more reluctant to do if inflation increases.
Increased costs to business due to higher tariffs on imports could also be a factor in last month’s number, a situation that will only worsen after more tariffs were implemented in early August.
