US producer price growth hits highest monthly pace since 2022 as tariffs lift costs for businesses

US producer prices rose in July at the fastest monthly pace since 2022, with data showing signs that President Donald Trump’s tariffs are beginning to push up costs for businesses.

The producer price index (PPI) climbed 0.9 per cent from the previous month, after holding steady in June, according to the Department of Labour. The figure was far above the 0.2 per cent gain forecast by economists, and took the annual increase to 3.3 per cent.

Services lead the surge

The rise was driven largely by services, which advanced 1.1 per cent in the month, their biggest jump since March 2022. Goods prices increased 0.7 per cent. The Labour Department said more than three-quarters of the overall gain came from services, particularly trade services, which measure margins for wholesalers and retailers. While volatile, these are viewed by economists as a signal that trade disruptions are weighing on supply chains.

Goods exposed to tariffs also showed notable increases. Forty per cent of the monthly rise in goods prices came from food, while metals such as steel and aluminium, subject to 50 per cent import levies, recorded sharp price gains in recent months.

The unexpectedly strong PPI reading unsettled Wall Street, with the main US equity indices declining after the release. It also complicates the Federal Reserve’s decision-making as policymakers weigh the timing of the next interest rate cut.

“Input costs for producers jumped in July as price pressures for businesses build from compounding tariff impacts,” said Ben Ayers, senior economist at Nationwide. “While businesses have assumed the majority of tariff cost increases so far, margins are being increasingly squeezed by higher costs for imported goods.”

Fed officials have been divided over the inflationary impact of the administration’s trade policy. Some believe the effect will be short-lived, while others warn that higher input costs could feed more persistently into consumer prices. The July data suggest that the burden on producers from tariffs is becoming more visible, particularly in sectors directly targeted by the duties.

With inputs from AFP