Wholesale prices unexpectedly fell in August, falling below economists’ expectations and defying concerns about a tariff-induced spike in supplier costs.
The US Bureau of Labor Statistics reported on Wednesday that producer prices fell 0.1% in August, reversing some of the previous month’s sharp increase in wholesale prices.
Since President Donald Trump began escalating tariffs earlier this year, the monthly wholesale-price measure has been closely watched as a predictor of a potential pass-through to consumer prices.
In July, producer prices rose 0.9%, exceeding economists’ expectations and fueling fears of future price increases paid by consumers. The drop in wholesale prices last month may alleviate some of those concerns, but analysts will gain more clarity from consumer price data due on Thursday.
The wholesale price data released on Wednesday, however, raised some concerns. A measure of core producer prices, which excludes volatile prices for food and energy, rose 0.3% in August, marking the fourth consecutive month of increases.
Overall, wholesale prices rose 2.8% in the year ending August, the largest one-year increase in the index since March.
The new data comes at a critical time for the country’s economy. In recent months, inflation has increased while hiring has slowed, raising the prospect of an economic double-whammy known as “stagflation.”
Fed Chair Jerome Powell recently hinted at the possibility of interest rate cuts, appearing to be more concerned about slowing job growth than rising prices. Investors are expecting a quarter-point interest rate cut when Fed policymakers meet later this month.
