The Produce Price Index for July showed that final demand advanced 0.9% with goods increasing 0.7% and services rising 1.1%, according to the August 14 report from the U.S. Bureau of Labor Statistics.
“Input costs for producers jumped in July as price pressures for businesses build from compounding tariff impacts,” writes Nationwide Senior Economist Ben Ayers, in a statement. “While businesses have assumed the majority of tariff costs increases so far, margins are being increasingly squeezed by higher costs for imported goods. We expect a stronger pass through of levies into consumers prices in coming months with inflation likely to climb modestly over the second half of 2025.”
Ayers offered the following analysis.
Tariff price increases were most pronounced within metal and food categories with final demand goods prices up 0.7% on the month. Higher energy costs also played a role as final demand prices less food and energy rose a more manageable 0.4% But the PPI readings for steel, aluminum and primary nonferrous metals have jumped in recent months following recent tariff hikes, adding to cost concerns for manufacturers.
Tariffs were not the only story in July as final demand services prices also moved up sharply. Over half of the increase came from trade services (which measures changes in margins for wholesalers and retailers) in a sign that trade disruptions are impacting supply chains. The combined input cost pressure from higher goods and service prices in July suggests that business investment will remain soft in coming quarters. This and an expected pullback in consumer spending should drive weak economic activity to finish 2025, with real GDP growth under 1 % projected for the third and fourth quarters.
