'Kick in the teeth': Key indicator comes in ‘scorching hot’ just as Trump tariffs hit

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17 August

President Donald Trump in the White House on March 20, 2025 (Official White House Photo by Daniel Toro/Flickr)

A leading inflation indicator surged much more than expected last month, just as the impact of U.S. President Donald Trump's tariffs started to weigh on American businesses and consumers.

New Producer Price Index (PPI) numbers released on Thursday showed that wholesale prices rose by 0.9% over the last month and by 3.3% over the last year. These numbers were significantly higher than economists' consensus estimates of a 0.2% monthly rise and a 2.5% yearly rise in producer prices.

PPI is a leading indicator of future readings of the Consumer Price Index, the most widely cited gauge of inflation, as increases in wholesalers' prices almost inevitably get passed on to consumers. Economists have been predicting for months that Trump's tariffs on imported goods, which at the moment are higher than at any point in nearly 100 years, would lead to a spike in inflation.

Reacting to the higher-than-expected PPI number, some economic experts pinned the blame directly on the president.

"So much for foreigners paying tariffs," commented Joseph Brusuelas, chief economist at tax consulting firm RSM US, on X. "If they did, PPI would be falling. Wholesale prices up 3.3% from a year ago and 3.7% in the core. The temperature is definitely rising in the core. This implies a hot PCE reading lies ahead."

Liz Pancotti, the managing director of policy and advocacy at the Groundwork Collaborative, took a deep dive into the numbers and found that Trump's tariffs were having an impact on a wide range of products.

"There is no mistaking it: President Trump's tariffs are hitting American farmers and driving up grocery prices for American families," she said. "Wholesale prices for grocery staples, like fresh vegetables (up 39% over the past month) and coffee (up 29% over the past year) are rising, squeezing American families even further in the checkout line."

Pancotti singled out the rise in milk prices as particularly worrisome for American families.

"Milk drove more than 30% of the increase in prices for unprocessed goods, rising by 9.1% in just the past month," she explained. "Tuesday's CPI print showed that milk prices rose by 1.9% in July, and this PPI data suggests further price hikes are on the way."

Betsey Stevenson, who served on former President Barack Obama's Council of Economic Advisers, also pointed the finger at Trump's policies.

"Tariffs will cause higher prices," she said. "Volatility and uncertainty will cause higher prices. The PPI jump is not a surprise, it was inevitable."

On his Bluesky account, CNBC's Carl Quintanilla flagged analysis from economic research firm High Frequency Economics stating that the new PPI numbers were "a kick in the teeth for anyone who thought that tariffs would not impact domestic prices in the United States economy."

The firm added that it "will not be a long journey for producers' prices to translate into consumer prices" in the coming months.

Liz Thomas, the head of investment strategy at finance company SoFi, argued that the hot PPI numbers could further frustrate Trump's goal of getting the Federal Reserve to lower interest rates given that doing so would almost certainly boost inflation further.

"The increase in PPI was driven by services, and there were increases in general services costs and in the Trade component (i.e., wholesale/retail margins)," she commented. "The Fed won't like this report."

Ross Hendricks, an analyst at economic research firm Porter & Co., described the new report as "scorching hot" and similarly speculated that it would stop the Federal Reserve from cutting rates.

"Good luck with them rate cuts!" he wrote. "Can't recall the last time we've seen a miss that big on a single monthly inflation number."

Hedge fund manager and author Jeff Macke jokingly speculated that the bad PPI print would cause Trump to fire yet another government statistician just as he fired Erika McEntarfer, the former commissioner of the Bureau of Labor Statistics.

"Whoever compiles the PPI needs to update their CV," he wrote.

Just as with the monthly jobs report, the Bureau of Labor Statistics collects and publishes PPI data.

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