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lite.cnn.com - on gopher - inofficial
ARTICLE VIEW:
Wholesale inflation cooled in August as businesses absorb tariff costs
— for now
By Alicia Wallace, CNN
Updated:
10:32 AM EDT, Wed September 10, 2025
Source: CNN
US inflation cooled off at the wholesale level in August, bolstering
hopes that high tariffs aren’t yet causing prices to spiral out of
control, fresh data showed Wednesday.
However, economists caution, the better-than-expected reading could be
a sign of a slowing economy and that shrinking businesses’ margins
could foretell higher prices for consumers in the near future.
Producer prices unexpectedly fell 0.1% in August, cooling annual
inflation to 2.6% from a , according to Bureau of Labor Statistics
data.
Helping to drive prices lower was a 1.7% drop in trade services, a
category reflective of changes in retailers and wholesalers’ gross
profit margins.
If margins are shrinking, it could be an indication that businesses are
using those to eat higher costs — such as those from steep tariffs
— and ultimately pass more of those costs to consumers or make
cutbacks elsewhere, economists have said.
The trade services category can be highly volatile; however, August’s
estimated drop is the biggest monthly decline in more than a year. (PPI
data is revised the following month as more comprehensive information
becomes available from businesses).
When excluding highly volatile components like trade services, as well
as food and energy, the underlying inflation trend appears less rosy:
Prices rose 0.3% from July and ticked up to 2.8% for the 12 months
ended in August.
Still, Wednesday’s report painted a picture of inflation not
drastically escalating at the wholesale level at a time when President
Donald Trump’s tariffs have settled in more firmly. The softer
wholesale inflation dynamic bolstered investors’ expectations that
the Federal Reserve will follow through cutting interest rates later
this month.
“The tariff effect is not boosting across-the-board price pressures
yet,” Christopher Rupkey, chief economist at FwdBonds, wrote
Wednesday in a note. “Economists will still caution markets that core
producer goods prices are rising significantly at the producer level,
so the country is not out of the woods from the inflation threat.”
“But the warnings are falling on deaf ears as far as investors are
concerned. As time goes on, one has to wonder if there are slow-growth
reasons and weak economic demand that is keeping inflation in check,”
he added.
Stocks were mixed. The Dow fell 65 points, or 0.14%. The S&P 500 and
Nasdaq each gained 0.4%. Treasury yields fell.
Economists were expecting that the overall PPI, which measures the
change in prices received by producers of goods and services, would
increase by 0.4% on a monthly basis and hold unchanged at the
previously estimated 3.3% from a year ago, according to FactSet
estimates.
Economists expected that a core measurement of PPI that excludes food
and energy would slightly increase on an annual basis. Wednesday’s
report showed that core PPI excluding food and energy (but still
including trade services) fell 0.1% and slowed to 2.8%.
Wholesale consumer durable goods prices increased by 0.3% for the
third consecutive month, a likely indication of tariff-related effects.
PPI serves as a potential bellwether for the prices consumers may see
in the months ahead.
“Producer prices for goods continue to rise steadily in response to
the tariffs,” Samuel Tombs, chief US economist at Pantheon
Macroeconomics, wrote Wednesday. “Commodity prices, however, are
flat, shipping costs have returned to their lowest levels since their
post-pandemic surge, and the dollar has held its value against other
currencies since June. So core goods PPI inflation should ease after
producers have finished passing on tariff costs in a few months’
time.”
And for American consumers, prices have been rising faster than normal
in recent months as more businesses have started to pass along the
costs from steep import tariffs. Sharply rising goods prices have put
upward pressure on overall inflation.
To what extent that trend continued in August will be much clearer on
Thursday, when the BLS releases the latest Consumer Price Index data.
The most widely used inflation gauge is expected to show that prices
rose 0.3% in August, a faster monthly pace than the 0.2% rate in July
and that annual inflation would likely rise to 2.9%, its highest since
January.
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