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US wholesale prices jumped in July, rising 3.3 per cent from a year earlier, in the clearest sign yet that President Donald Trump’s tariffs are seeping through to the American economy.
The rise in the Producer Price Index, which tracks what domestic US producers charge for their goods and services, was the biggest jump since February.
The reading was well above June’s 2.4 per cent annual gain and the 2.5 per cent rise expected by economists polled by Bloomberg.
The figures suggest that despite muted inflation to date in consumer prices, the levies the president has imposed on US trading partners are driving an increase in prices further up the supply chain.
The rise “shows inflation is coursing through the economy, even if it hasn’t been felt by consumers yet”, said Chris Zaccarelli, chief investment officer at Northlight Asset Management.
Separate data earlier in the week showed that annual consumer price inflation held steady at 2.7 per cent in July, defying expectations of a rise to 2.8 per cent.
Analysts noted that much of the gains in Thursday’s figures were driven by a surprise increase in margins for wholesalers and retailers.
The core index, which strips out the effects of volatile food, energy and trade prices, rose 2.8 per cent ahead of expectations of a 2.5 per cent gain.
The dollar and short-term Treasury yields edged higher, as traders marginally reined in their expectations for Federal Reserve interest rate cuts.
The probability of a quarter-point cut at next month’s Fed meeting — which was fully priced in by swaps markets before the PPI figures — fell slightly to about 95 per cent.
The dollar was down 0.2 per cent against a basket of rival currencies, while S&P futures fell 0.4 per cent ahead of the Wall Street open.
“The market response is right — this isn’t great data — but it is so trivial compared to jobs, to rents, to CPI. It is a minor data point. Still, if I were the person who produced the report, I would probably be dusting off my resume,” said Peter Tchir, head of macro strategy at Academy Securities.
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