The US Department of Labor released data this morning on the 14th showing a significant increase in the US Producer Price Index (PPI) in July, exceeding market expectations and signaling a renewed round of inflationary pressures in the upstream US supply chain.
The data showed that the PPI rose 0.9% month-over-month in July, significantly higher than the zero growth in June and the market expectation of 0.2%, marking the largest increase since June 2022. The year-over-year increase was 3.3%, significantly higher than the 2.3% increase in June and the market expectation of 2.6%, reaching its highest level since February this year.
The Department of Labor stated that the July PPI increase was primarily driven by the services sector. The services PPI rose 1.1% month-over-month, the largest increase since March 2022.
Excluding the more volatile food and energy components, the core PPI also rose 0.9% month-over-month and 3.7% year-over-year in July, significantly higher than the 2.6% year-over-year increase in the previous month.
After the data was released, U.S. stocks weakened, and the U.S. dollar and long-term U.S. Treasury yields rose. Analysts believe that the data released that day showed that U.S. companies were facing rising cost pressures and that this could further shift costs downstream.