The cost of goods in the producer price index for June rose at the quickest pace since February, by 0.3% on the month, as tariffs began to make their way into the broader economy.
At the same time, prices for transportation and warehousing dropped for the first time since March as demand for inventory stockpiling declined.
Get RSM’s Market Minute economic commentary every morning. Subscribe now.
The two dynamics helped keep the producer price index for June unchanged from May, according to Labor Department data released on Wednesday.
The bigger concern now is that weaker-than-expected producer inflation might imply a bigger-than-expected pullback in spending and business activities. Such a pullback would add to rising concerns over a “stagflation-lite” scenario.
Other highlights from the producer price data:
- The core producer inflation number, like the top-line figure, was unchanged from May.
- On a year-ago basis, the index rose by 2.3%, down sharply from the 2.7% increase in May. Core PPI rose by 2.6% annually, down from 3.2%.
- Falling demand caused airfares to plummet in June, falling by 2.7%, the most since May last year.
There was one more sign of more inflation to come when it comes to car prices, according to the producer inflation report. So far, dampened retail car prices have been one of key drivers of low inflation numbers. But June’s increase in producer prices suggests a rebound in retail prices , adding more pressure on overall inflation.
