In August, producer prices in the U.S. fell more than forecast. That surprise stunned many economists, who had forecast an increase due to the recent inflationary impacts spearheaded by burgeoning tariffs. The decline continues a downward trend in wholesale prices, which the U.S. Bureau of Labor Statistics reported fell 0.1% for the month. This is a dramatic decrease from the previously impressive 0.9% gain in July. This new data is a cause for optimism, not just for all of us, but particularly for consumers concerned about increasing costs.
Year-on-year wholesale prices have fallen, despite continued concern over tariffs levied earlier this year. These tariffs would, in fact, substantially increase costs for our suppliers. Earlier this month, we learned that wholesale prices skyrocketed 2.8% year-over-year through August. This was the biggest leap since March and set off flashing warning signs that the economy might be experiencing dangerously persistent inflation. The overall August numbers indicate a reassurance on those fears.
The monthly wholesale-price measure has captured lots of public attention as a bellwether of what rising costs will soon do to consumer prices. A lot of analysts, ourselves included, have been watching these closely ever since President Donald Trump started ramping up tariffs earlier this year. Producer prices fell 0.1% last month. This drop undoes much of the dramatic increases we’ve experienced in recent months, notably the massive jump in July.
The decline comes as a reprieve. Perhaps more importantly to note is that core producer prices — which exclude daily items such as food and energy — increased by 0.3% in August. This is the fourth straight month of increases for this metric. It indicates that more persistent inflationary pressures are still in the mix.
Given the current tariff environment, economists were expecting a stronger reaction from wholesale prices. They were especially worried because July’s jump had already gone well beyond expectations, sparking worries about a potential spike in consumer costs. The unusual drop in August might indicate a reversal — or at least a break — in this pattern.
Analysts are now looking to get further clarity from consumer price data expected on Thursday. In the meantime, the market is hard at work trying to process these numbers. Those figures, long promised, are about to provide some much-needed light. They will share what rising wholesale prices mean for consumer prices and the long-term health of the economy.
