US Producer Inflation Heats Up as Goods, Services Prices Soar

U.S. producer prices increased by the most in three years in July 2025 amid a surge in the costs of goods and services. This outturn suggested that a broad pickup in inflation was imminent, posing a dilemma for the Federal Reserve (Fed).
The stronger-than-expected producer inflation report from the Labour Department on Thursday, August 14, 2025, followed data showing consumers paid higher prices for services like dental care and airline fares last month. Also, there were no signs of further labour market deterioration in early August 2025.
Economists had hoped that moderate services price gains would blunt the inflationary impact of higher goods prices from President Donald Trump's sweeping import tariffs. Though financial markets continued to anticipate the Fed would resume rate cuts in September 2025, some economists urged caution. "This is a kick in the teeth for anyone who thought that tariffs would not impact domestic prices in the United States economy," said Carl Weinberg, chief economist at High Frequency Economics. "This report is a strong validation of the Fed's wait-and-see stance on policy changes."
The producer price index (PPI) for final demand jumped 0.9% last month, the largest advance since June 2022, after being unchanged in June 2025, the Labour Department's Bureau of Labour Statistics said. Economists polled by Reuters had forecast the PPI rising 0.2%. Notably, a 1.1% jump in the costs of services accounted for more than three quarters of the broad-based increase in the PPI.
In the 12 months through July, the PPI increased 3.3% after advancing 2.4% in June 2025. Economists said the data suggested businesses were not fully absorbing the higher costs from tariffs as some had argued in the wake of a mild increase in consumer prices in July. "There continues to be clear evidence that prices of a number of durable goods are being passed through to consumers," said Michael Hanson, an economist at J.P. Morgan.

(Source: Reuters)