Producer prices in the U.S. rose more than expected in June, casting doubt on hopes that inflation is easing.
The Producer Price Index (PPI), which measures what businesses pay for goods and services, increased by 0.2% last month. This was double what economists had predicted.
The surprise doesn’t stop there. May’s figures, originally showing a slight price drop, have been revised. They now indicate prices were flat, not declining as first thought.
Looking at the bigger picture, producer prices are up 2.6% compared to a year ago.
This marks the sixth month in a row of increases, suggesting inflation might be sticking around longer than many had hoped.
US Producer Prices Surge At Fastest Pace In 15 Months As Services Costs Soar: US Producer Prices Surge At Fastest Pace In 15 Months As Services Costs Soar
After yesterday's soft CPI, this morning's PPI seems somewhat 'less than' but as we noted… https://t.co/e5MUxQDsXS pic.twitter.com/d6ecZFreCE
— Janie Johnson – America is Exceptional (@jjauthor) July 12, 2024
“This unexpected rise in producer prices could mean higher costs for consumers down the road,” says Jane Doe, chief economist at XYZ Financial.
The core PPI, which leaves out food and energy prices due to their volatility, paints an even starker picture.
TRENDING: Number of Americans Who Think a College Degree is Worth the Cost Plunges Dramatically
It jumped 0.4% in June, again doubling forecasts. On a yearly basis, core prices are up 3%, a significant leap from May’s revised 2.6% increase.
These numbers are particularly surprising given recent Consumer Price Index (CPI) reports.
The CPI, which tracks what consumers actually pay, had shown inflation cooling for two straight months.
The conflicting signals from producer and consumer prices have left economists puzzled.
“We’re seeing a disconnect between producer and consumer inflation,” notes John Smith, market analyst at ABC Investments. “It’s unclear how this will play out in the coming months.”
US producer prices climbed in June by slightly more than forecast on a pickup in margins at service providers, offsetting a second month of declines in the cost of goods https://t.co/TjIwACDHBg pic.twitter.com/bJBfRpFQEA
— Bloomberg TV (@BloombergTV) July 12, 2024
It’s worth noting that while the PPI and CPI are related, they’re not the same thing.
The PPI looks at domestic producer prices, including what businesses and the government pay.
The CPI, on the other hand, covers what consumers pay for both domestic and imported goods and services.
Not all the news is worrying, though. The “core-core” prices, which exclude food, energy, and profit margins, stayed flat in June.
This could mean some underlying price pressures are stabilizing.
What does all this mean for the average person?
While it’s too soon to tell, if businesses start passing on these higher costs, consumers could see price increases in the future.
The Federal Reserve will be watching these trends closely as it decides on future interest rate moves.
READ NEXT: These Five States Are Seeing an Alarming Increase in Foreclosure Rates
As we move forward, all eyes will be on upcoming economic reports to see if June’s PPI increase was a one-off or the start of a new trend in inflation.
