Wholesale Prices Flat in July, Cooling Fresh Inflation Worries

Today’s Focus

The Producer Price Index (PPI) was unchanged in July, the Bureau of Labor Statistics reported Thursday, well below the 0.2% monthly increase economists surveyed by Reuters had forecast.

On a 12-month basis, wholesale prices rose 2.4%, easing from 2.7% in June, according to Reuters. Core PPI, which strips out food and energy, also came in flat for the month.

Reuters reported that falling costs for gasoline and food services offset small increases elsewhere in the goods basket. The Associated Press noted energy prices at the wholesale level dropped 1.8% in July, with gasoline down more than 6%.

CNBC reported that traders raised the odds of a September rate cut by the Federal Reserve after the release, with futures markets pricing in a roughly 90% probability of a quarter-point reduction. The Dow, S&P 500 and Nasdaq all traded higher on the news, according to Yahoo Finance.

The reading follows Tuesday’s Consumer Price Index (CPI) report, which showed annual inflation at 2.7% in July. Bloomberg reported that the deceleration in producer prices was broader than forecasters expected, with services costs, a sticky category watched closely by the Fed, showing little upward pressure.

Fed Chair Jerome Powell has said the central bank wants “greater confidence” that inflation is moving sustainably toward its 2% target before easing policy. The next Federal Open Market Committee meeting is scheduled for September 16-17.

The White House pointed to the data as evidence that President Donald Trump’s tariff regime is not fueling a broad price surge, according to The Hill. Democratic lawmakers countered that goods categories most exposed to new duties are still showing pass-through effects that may take months to appear fully in the data.

The Debate

Supporters argue

Trump administration officials and allied economists said the July PPI reading undercuts warnings that tariffs would ignite inflation. Treasury Secretary Scott Bessent told CNBC that “the data continues to show disinflation,” pointing to the flat wholesale reading and softer services prices.

Supply-side economist Stephen Moore, a Trump ally, argued on Fox Business that the report vindicates the administration’s view that tariff revenue can coexist with stable prices, so long as energy costs stay contained. He said falling gasoline prices are doing “heavy lifting” for consumers.

Conservative commentator Larry Kudlow, writing at Fox News, said the numbers give the Federal Reserve cover to cut in September without appearing to bow to political pressure from the White House. Trump has publicly urged Powell to reduce rates.

The Wall Street Journal editorial board wrote that the combined CPI and PPI readings suggest the tariff shock is being absorbed more smoothly than critics predicted, though it cautioned that the picture could shift if duties on Chinese transshipments expand.

Critics argue

Democratic economists and progressive analysts said the July PPI figure masks category-level pressures that will surface later in 2026. Former Treasury Secretary Lawrence Summers wrote on X that headline disinflation is being driven by volatile energy prices and that core goods inflation tied to tariffs is “still building in the pipeline.”

Sen. Elizabeth Warren (D-MA) said in a statement that wholesale food and gasoline declines are welcome but that “working families are not seeing relief” in rent, insurance and healthcare, categories she said the Fed cannot fix with rate cuts alone.

The Economic Policy Institute, a labor-aligned think tank, argued in a Thursday note that PPI’s flat print reflects margin compression by importers absorbing tariff costs, a dynamic it said is unsustainable and will eventually reach consumers.

House Financial Services ranking member Maxine Waters (D-CA) said the report does not justify what she called Trump’s “political campaign” to force Powell into a rate cut before the September meeting.

What the experts say

Nonpartisan analysts said one soft month does not settle the tariff-inflation question. The Peterson Institute for International Economics estimated in a July research note that Trump’s cumulative 2025-2026 tariffs will add roughly 1 to 1.4 percentage points to consumer inflation over 12 to 18 months, with lags of several quarters.

Brookings Institution senior fellow Wendy Edelberg told Bloomberg that PPI can move independently of CPI in the short run because of margin adjustments, and that the July reading is “consistent with disinflation but not proof of it.” She said the Fed will weigh payrolls and services inflation more heavily than a single wholesale print.

The Congressional Budget Office (CBO) projected in its January outlook that PCE inflation, the Fed’s preferred gauge, would end 2026 near 2.4%, above the 2% target. Historical Federal Reserve data show PPI and CPI have diverged for several months at a time during past tariff episodes, including 2018-2019, before reconverging.

By the Numbers

0.0%: month-over-month change in the Producer Price Index for July, according to the Bureau of Labor Statistics.

0.2%: consensus forecast for July PPI from economists surveyed by Reuters.

2.4%: year-over-year rise in wholesale prices in July, down from 2.7% in June, per Reuters.

2.7%: annual Consumer Price Index reading for July, released Tuesday, according to the Associated Press.

6%+: decline in wholesale gasoline prices in July, per AP.

~90%: market-implied probability of a September Fed rate cut following the release, according to CNBC.

1 to 1.4 points: Peterson Institute estimate of cumulative tariff-driven inflation over 12-18 months.