Wholesale price inflation slows last month as gas, food costs fall

Key Takeaway from Today’s U.S. Producer Price Index (PPI) Data

The July Core Producer Price Index (ex Food & Energy YoY) was released today, providing another crucial piece to the current inflation puzzle:

🔹Actual: 4.2%
🔹Expected (Forecast): 4.2%
🔹Previous: 4.7%

Why it matters:
Core PPI cooled down sharply from 4.7% in the previous month to 4.2%, landing exactly in line with consensus forecasts. Because wholesale prices often act as a leading indicator for consumer inflation (CPI), this slowdown suggests underlying price pressures at the producer level are continuing to moderate.

How do you see this impacting the Federal Reserve's rate trajectory heading into the autumn?

The Department of Labor reported that US initial jobless claims increased by 9,000 from the previous week to 209,000 in the week ending 8 August. This remains below the average of the last two years. Continuing claims, which serve as a proxy for outstanding unemployment in the US, decreased by 22,000 to 1,777,000 in the previous week (ending 1 August). Both real-time indicators of the labor market are at low levels. The data remain suggestive of a stable, low-hire, low-fire labor market.

Wholesale Inflation Cools in July: Key Takeaways

US wholesale inflation pulled back sharply last month, driven by a temporary decline in energy prices and cooling input costs across industries. While this offers temporary relief for businesses and consumers, rising gas prices in late July could keep inflation risks alive into August.

1. By the Numbers (July PPI Data)

Metric	July	June	MoM Change
Headline PPI (YoY)	4.7%	5.5%	Flat (0.0%)
Core PPI (ex-food & energy)	4.2%	4.7%	+0.2%

• What drove it: A temporary reversal in the Iran war gas price spike, alongside easing non-energy input costs.
  
  
• The caveat: Fuel prices began climbing again in late July and early August, which could reverse some of these gains in the next report.
  
  

2. Impact on Consumers & the Broader Economy

• Wage Squeeze: Even as headline numbers cool, consumer prices have outpaced wage growth for four consecutive months. High costs for necessities like rent and utilities are forcing households to tighten spending.
  
  
• Forward Outlook: Since producer prices reflect costs before they reach store shelves, this cooling trend hints at potential relief for consumer prices in the months ahead—provided energy costs don't rebound sharply.
  
  

3. What It Means for the Federal Reserve

• September Decision: The softer PPI reading, coupled with a surprising contraction in July employment (job cuts), gives Fed officials stronger justification to hold interest rates steady at their September meeting rather than raising them.
  
  
• The PCE Wildcard: Key PPI components (like healthcare and financial services) feed into the Fed’s preferred inflation metric, the Personal Consumption Expenditures (PCE) index.
  
  
• Early Forecast: Economists project the upcoming Core PCE report (due Aug. 26) will show annual core inflation holding stubbornly at 3.3%—well above the Fed’s 2% target.

The Jobless Boom Is Here

Patrick Collison’s X poll: 13,000 respondents expect 4.3% annual growth over five years—and an 8% drop in employment.  

That’s the “AI-optimist” dream: more output, fewer workers.  

Odds of that exact forecast? Near zero. But the *direction* isn’t fantasy anymore. Because we’re living it.  

GDP? Meh—2.1% over the past year, 1.5% annualized in Q2.  

Stocks? Up 13% in 2026, hitting records even through tariffs, war, oil spikes, and a closed Strait of Hormuz.  

Why? Not a bubble—earnings are beating prices. Excluding Amazon and Alphabet, Q2 earnings surged 32%. The S&P 500’s median earnings growth hit 13%, up from 8% two years ago.  

And it’s not just tech. Banks and small caps are outpacing the Magnificent Seven. CEOs everywhere are talking “broad-based” demand.  

So: solid revenue, soaring profits.  

But hiring? Flat.  

Payrolls shrank in July—the fifth monthly drop in a year. Private hiring averaged just 50,000 a month over the last year. That’s recession-level weakness without a recession.  

Unemployment stays above 4% only because boomers are retiring and immigration is drying up. Job openings sit at post-pandemic lows. Wage growth? 3.2%—the weakest since pre-COVID.  

Can this last? Maybe. Consumers are spending savings. Data centers are borrowing billions.  

Both can’t go on forever.  

But for now? If AI delivers even a fraction of the hype, the jobless boom isn’t just possible. It’s here.