A new economic report is a major warning sign to American consumers.
US wholesale inflation surged unexpectedly last month, signaling that President Donald Trump’s sweeping taxes on imports are pushing costs higher.
The Labor Department reported on Thursday that its producer price index, which measures inflation before it reaches consumers, was up 0.9 percent from June and 3.3 percent from a year earlier.
Analysts typically use the metric as a predictor of incoming price hikes at retail and grocery stores. Economists predicted the number would be lower.
Wall Street immediately turned red on the news. Futures in the Nasdaq and S&P 500 both sank around 0.4 percent before the bell, ending a two-day streak of investment gains.
Thursday’s data shows it’s more expensive to do business in the US. Frequently, companies are forced to either increase consumer prices or slash jobs to maintain their profits when costs rise.
Thursday’s report comes two weeks after federal experts released a grim jobs report, showing the last three months of job creation were significantly lower than analysts had expected.
Unemployment was also on the rise.
Thursday’s data turned stocks into the red, reversing a two-day upward trajectory for all three major indexes
Companies have been issuing cost warnings for months: car companies like Ford and GM stated they’re paying billions in tariffs, while retailers Target and Best Buy warned that they would have to raise consumer prices on popular goods.
Independent analysts have consistently told the Daily Mail that those increasing costs will raise prices for everyday consumers.
But so far, those prices haven’t moved into the consumer economy as predicted.
On Tuesday, the Labor Department reported that consumer prices rose 2.7 percent last month from July 2024, same as the previous month and up from a post-pandemic low of 2.3 percent in April.
Core consumer inflation, which strips out volatile food and energy prices, rose 3.1 percent in June.
Both figures are above the Federal Reserve’s 2 percent target; however, overall inflation was lower than investors had expected.
At the time, Wall Street rushed to flush cash into the market on the surprisingly rosy picture.
A few metrics in Thursday’s data have mild signs of hope for US consumers.
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.
Economists also watch it because some of its components, notably measures of healthcare and financial services, flow into the Federal Reserve’s preferred inflation gauge – the personal consumption expenditures, or PCE, index.
