We might need to fire another statistician.
Wholesale price growth across the US economy ran much faster than anticipated in July, BLS data released on Thursday suggested. By “much faster” I mean the headline MoM PPI print was 0.9%, quadruple (and then some) consensus. The unrounded print was 0.94490%.
At the risk of overstating the case, this was a scorcher. The month-to-month increase was the largest in a little over three years, which is to say since headline consumer price growth in the US briefly flirted with double-digits. Excluding food and energy, core PPI likewise rose 0.9%, the warmest in 40 (forty) months.
Taken at face value, what you see in the chart’s a problem. And it throws cold — err, warm? — water on Tuesday’s cool CPI release.
Like the July CPI report, the PPI release was warmest on the services side which printed a 1.1% MoM increase, the most pronounced since March of 2022 and among the largest on record.
More than half of the steep rise on the services gauge was attributable to margins for trade services, which rose 2.0% from June.
The trade gauge tracks wholesaler and retailer margins. July’s 2% advance was the third-largest in the history of the series. Drilling down further, margins for machinery and equipment wholesaling were the biggest contributor to the jump in the overall services gauge. That subindex rose nearly 4%.
The goods side was no help. PPI goods rose 0.7% in July from June, matching the warmest reading of 2025. Nearly half of that advance was blamed on a 1.4% MoM increase on the foods gauge, the third-largest since November of 2022. Prices for fresh and dry vegetables jumped 39%, the most since Vladimir Putin invaded his neighbor.
Plainly, this argues in favor of the idea that inflation risks have resurfaced in the US. This is pipeline pressure and whatever the breakdown implies for July’s PCE price growth readout later this month (probably nothing too dramatic given the category breakdown), the big-picture takeaway is that the Trump administration might’ve been too early to celebrate. Companies are beginning to pass along the cost of the tariffs.
Markets will be inclined to look through this for the time being, but this is just the kind of release that makes people like Jerome Powell nervous. I don’t think it’s far-fetched (at all given recent events) to suggest the BLS could be pressured by the Trump administration to start scaling back the release schedule if the numbers aren’t favorable, likely on the excuse the data’s too volatile and therefore can’t be “trusted.”
Indeed, the BLS was already hamstrung in its capacity to calculate the PPI gauges by staff shortages. So, in effect, Trump can undermine the data by leaving the bureau short on personnel, then turn around and cite data quality as a reason to stop publishing the numbers or, more likely, to publish them less frequently.
When I saw that, I wondered ” is trump raging yet?”
I set my mind about forming a “Captured Fed” plan for some reallocation after Bessent’s 150bp cut propaganda. And now with nascent inflation data spiking (finally?) that plan is looking as shaky as standing pat. While Implied Vols are still looking tame, I am experiencing very high Decision Vol™. It seems like anything I think of, hoping to be correct about anything is made worse by deteriorating data quality, deteriorating government quality, and deteriorating monetary quality. I’ve been in the “Gold is a barbarous relic” camp for so long, it’s hard to shake, but seeing BRICs preparing for dollar vol and prices rising, my tiny position is a top performer.
Tariffs on countries we import vegetables from + ICE disappearing the labor that produces vegetables domestically = ?
Fire the numbers people and act like cheap gas is the only thing that matters. (Hey, it’s worked for 25 years!)
As another reader noted, some monthly economic data is required by law 29 U.S. Code § 2 so Trump will have to get Congress to cooperate in order to suppress all monthly data (or all data). The feckless legislature will probably hide the change in a larger bill. Then investors will rely on private data and, where no data is available, assume the worst (because of the govt data turns “good”, it will be magically released).
John, Trump doesn’t have to obey the law. We have to stop saying that. He simply doesn’t care, and nobody else seems to either, or if/when/where someone does care, they’re unable to do anything about it. I don’t know what it’s going to take for people to wake up that reality. If he wants to stop publishing the PPI series, he’ll just tell the next BLS chief to stop and that’ll be the end of that data.
I realize you allowed for that with your “feckless legislature” remark, but no legislation’s necessary here. Once he gets his BLS chief in there, he’ll be able to just say “Stop publishing it” and that’ll be that. Someone could sue, but SCOTUS has defanged the lower courts and Roberts’s inclination is to rule not against (i.e., not always for, but in most cases not against) the administration as a way of riding out the storm. But here’s the thing: A court that has to ride out the storm is a court that knows it’s powerless. This is lost for now. Democracy has to wait on 2028. It’s suspended for the next three and half years. That’s just the unfortunate, on-the-ground reality.
And that’s assuming January 6, 2029 won’t feature assault weapons instead of bear spray and flag poles.
The mid terms could change the house or senate and cause gridlock for 2 years.
It’s a very low-delta outcome, but if the Democrats somehow manage to capture both chambers of the legislature in 2026, things could really get spicy. Most autocrats like to rise to power without forcing a constitutional crisis. The glide-path goes something like Legislative capture –> Amend the Constitution –> Capture the Judiciary –> Single party rule with sham elections.
In the event that one of the coequal branches stands across his path and says, “Stop,” that’s when we’ll get some really interesting headlines. Of course, Trump always chickens out, so maybe not.
So right! It’s what all authoritarians do..once they capture the Courts and Department of Justice, they are the law. That is, Trump is now the law.
I do think that cutting off the data won’t happen without a significant fuss. TIPS investors will sue the US govt over withheld CPI data . Many businesses and contracts use CPI and they will sue too.
What I wonder then is, after all this kerfuffle, how much of a “risk premium” do investors place on estimated inflation. I’m not sure if there are private datasets that can stand in for CPI and PCE the way ADP can stand in for NFP. So how do investors, especially bond investors, price assets? I think if you don’t know, you assume the worst – especially given the reason that the data was cut off. Seems like should tend to drive long yields up.
For that matter, if inflation and jobs data is suppressed, upon what is the Federal Reserve supposed to act? Even the most obtuse will have to recognize that monetary policy is being run by the White House. Which means that Trump will get the blame for everything that people now try to blame on the Federal Reserve.
Interesting to wonder how news media will report on inflation and jobs. I don’t think media etc will “not” report on these hot button topics, so will reporting get dominated by lurid anecdotals in the “if it bleeds it leads” fashion?
As with many things, I suspect Trump will find that by cutting off economic data, he’ll do himself more harm than good.
How many stockbrokers does it take to change a light bulb?
Two.
One to remove the bulb from it’s socket and drop it, while the other one tries to sell the bulb before it explodes on the floor, with both of them knowing the bulb was already burned out in the first place.