In a surprising turn of events, U.S. wholesale inflation showed signs of cooling in June, despite widespread concerns that President Donald Trump’s tariffs would drive up prices for goods before they reached consumers. The Labor Department reported on Wednesday that the producer price index (PPI) remained unchanged from May, following a 0.3% increase the previous month. Year-over-year, wholesale prices rose by 2.3%, marking the smallest annual gain since September. Both figures fell short of economists’ expectations. Excluding volatile food and energy prices, core producer prices also remained flat compared to May and increased by 2.6% from June 2024. This report came a day after the Labor Department revealed that consumer prices had risen by 2.7% year-over-year in June, the largest increase since February, driven by Trump’s sweeping tariffs on goods ranging from groceries to appliances. However, consumer and producer prices do not always move in sync. Bradley Saunders, North America economist at Capital Economics, noted a 0.3% rise in core wholesale goods prices, attributing it to the impact of Trump’s tariffs. Furniture prices surged by 1% from May, while home electronics rose by 0.8%, both categories heavily reliant on imports. Interestingly, steel mill producer prices dropped by 5.5% despite Trump’s 50% tariff on imported steel. Some companies had stockpiled goods before the tariffs took effect, helping to keep prices stable, but Saunders warned that these inventories are dwindling. With new tariffs on Japanese and South Korean imports set to take effect on August 1, the situation remains precarious. Auto retailers’ profit margins also fell by 5.4%, suggesting that car dealers are absorbing the costs of Trump’s 25% tariff on imported vehicles and parts. Economists are closely monitoring wholesale prices as they provide early insights into potential consumer inflation trends. The Federal Reserve, which has been cautious this year, is also watching the inflationary impact of Trump’s trade policies. Trump’s aggressive push for rate cuts has raised concerns about the central bank’s independence.
US producer prices unchanged with wholesale inflation remaining under control
