PPI spikes up in July, so the tariff effect will be on your store shelf soon.

We’ve been waiting for the $20 billion+ a month in additional tariff revenue to be reflected in cost pressures, and that may finally be happening, as a report on Thursday indicated.

The Producer Price Index (PPI) for July showed inflation for businesses rose 0.9% over the prior month, well ahead of the 0.2% increase that was forecast, data from the Bureau of Labor Statistics showed Thursday. On an annual basis, prices rose 3.3%, the most since February.

"Core" producer prices, which exclude food, energy, and trade services, rose 0.6% last month, the most since March 2022 and an uptick after prices were unchanged in June. On an annual basis, core producer prices rose 3.3%, which was also the most since February.

Producer prices measure price changes from the perspective of businesses offering or selling goods and services in the economy; consumer prices measure changes from the perspective of those paying for those goods and services.

Big jump: July PPI #inflation +3.3% y/y vs. +2.5% est. & +2.3% prior … ex-food and energy PPI +3.7% vs. +3% est. & +2.6% prior

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— Liz Ann Sonders (@lizannsonders616.bsky.social) August 14, 2025 at 9:15 AM

That's not a good trend, and the higher margins in services and higher costs for raw matertials (intermediate costs were up even more in July, at +0.8% and +1.1% at the steps before final demand) means that prices will be even higher on store shelves in the next month or two.

Thursday's data suggests, then, that companies will not absorb all costs incurred from tariffs but will pass some of these costs on to consumers in the form of higher prices.

"While businesses have assumed the majority of tariff cost increases so far, margins are being increasingly squeezed by higher costs for imported goods," said Ben Ayers, senior economist at Nationwide. "We expect a stronger pass-through of levies into consumer prices in [the] coming months."

Well, unless you think businesses will be nice enough to eat most of those extra costs and reduce their profits and HAHAHAHAHAHA!!!! You thought I was being serious that business would eat profits to help consumers? HAHAHAHAHA!

So this PPI number means that we’re likely not falling below the 2.8% annual rate that we’ve seen in core CPI in the last 3 months (which would be just over 0.2% a month), and it'll probably much higher than that in the next 3 months. And if consumers won’t accept price increases of that level, then we will be seeing new unemployment claims go well above the 220,000-225,000 per-week level that they have somehow stayed down at so far.

And yet, the stock market refuses to admit the stagflation that we might already be in, and certainly will be coming soon. Early stock losses were shaken off with the DOW and NASDAQ barely down at the close, and the S&P ended up at a new record.

Traders trimmed their Fed rate-cut expectations for the rest of the year to about 56.7 basis points, according to data compiled by LSEG, compared with around 63 bps before the report.

But they are still fully pricing in a quarter-percentage-point cut in September.

"The implication is that the Fed is going to offer a 25-(basis point) cut in September. But it will be a hawkish cut. It's way too early still for the Fed to wish to guide the market towards an extended easing cycle," said Thierry Wizman, global FX and rates strategist at Macquarie Group.

OK, but if businesses are paying another 0.5% a month due to higher costs, how is a 0.25% cut in rates going to counteract that? How strung out on debt do we think these companies are going to get?

Especially in a time when stocks are already in a Bubble.

"U.S. stocks are pricy," said Sam Stovall, chief investment strategist CFRA Research.

The S&P 500 index is trading at a price-to-earnings ratio of 23 based on forward estimates, or a near-40% premium to its 20-year average, he said.

And that’s price-to-earnings per share, which is being pumped up by nearly $1 trillion in stock buybacks so far in 2025. Take a look at how “pricy” stocks are when compared to actual sales.

Oh, but I'm sure future sales will make this a moot point. Especially as health insurance premiums go through the roof this Fall and there isn't enough labor to pick crops in the fields because of ICE raids, with prices are set to rise even more as a result of those shortages (and fresh vegetables were already up 38.9% in July's PPI report).

There's gotta be a point when the real-world economy starts having layoffs to match the lack of demand and profits, and affecting the stock market as well. Riiiiight?