This kind of inflation is nothing to be trifled with: In services +4.5%; in goods without energy +5.0%; in energy +24%; overall +5.4%; year-over-year.
By Wolf Richter for WOLF STREET.
In a nutshell: Inflation in prices that companies pay each other, not even including energy, accelerated in services to 4.5% and in goods to 5.0%, year-over-year. On top of that, energy prices spiked by 24%. But food prices were barely up, after the surge.
The overall PPI Final Demand rose by 5.4% year-over-year in August (red line in the chart). On a month-to-month basis, it rose by 0.40% (+5.0% annualized, blue line), according to the Bureau of Labor Statistics today. And the July readings were revised higher.
That’s a lot of inflation in prices that companies pay each other, after zigzagging higher ever since the low point in mid-2023, and the Fed needs to stop dilly-dallying around.
The services PPI rose by 4.5% year-over-year in August, and the July reading was revised higher (red in the chart below).
It accounts for 68% of the overall PPI final demand.
Month-to-month, the Services PPI rose by 0.11% (+1.3% annualized, blue).
The transportation & warehousing PPI, which is within the services PPI, spiked by 10.3% year-over-year, driven by higher input costs, including fuel costs (red in the chart below).
It has been zigzagging skyward since the low point in July 2023.
Month-to-month, it spiked by 1.2% (+15.1% annualized, blue).
Core PPI Final Demand, which excludes energy and food components, soared by 4.6% year-over-year (red in the chart below).
The index, dominated by the services PPI, has been zigzagging higher since the low point in January 2024.
Month-to-month, the index rose by 0.16% (2.0% annualized, blue).
The PPI for core goods, which excludes energy and food components, rose by 5.0% year-over-year, and has been in this range for the past four months, the highest since February 2023.
It has been zigzagging higher since March 2024.
Month-to-month, it rose by 0.38% (+4.6% annualized, blue).
The PPI final demand for energy spiked by 24.3% year-over-year and by 4.16% month-to-month (+63% annualized).
The chart shows the price level of the energy PPI, rather than the percentage change.
The PPI final demand for food rose by 0.1% year-over-year, and by 0.1% month-to-month (+1.4% annualized).
The chart shows the price level. After the 36% surge from mid-2020 through February 2025, prices for food that companies buy have essentially been range-bound (some prices, such as egg prices, have collapsed after their huge spike, while other prices have continued to rise).
PPI inflation tracks inflation for businesses. Consumer-facing inflation is tracked separately by the Consumer Price Index (to be released tomorrow) and the PCE price index, and those are somewhat less hot than inflation for businesses. And there are measures that track inflation faced by all economic participants…
Inflation in the overall economy – facing consumers, businesses, non-profits, and governments – which is released quarterly as part of the GDP data, is red-hot and was also revised higher. The inflation rate for the overall economy spiked by 6.4% annualized in Q2 from Q1, and by 4.4% year-over-year.
The Fed – the 12 voting members of the FOMC, chaired by Warsh – need to forget trying to wait this out somehow; they need to quit dilly-dallying around and vote for rate hikes, because this kind of inflation deep and broad in the economy is nothing to be trifled with.
In case you missed it: Why the Gasoline Price Spike Didn’t Derail Consumer Spending despite all Moaning & Groaning: Auto Dealers Got Caught Too
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It’s okay giving out 5k to every adult will get inflation under control. Trust the plan.
I wish more members of the Fed Reserve Board read Wolf Street! I hope your plea convinces some of them!
The Fed will have zero credibility, if they don’t raise by 25 bp next week.
What’s needed is at least three 25 BP hikes by the end of the year to make up for lost time.
Hopefully, this will cause the stock market to pull back at least 20%. Gold & bitcoin need to pull back as well to pay off some margin debt.
Less than a week to find out if the “dilly-dallying” continues.
When Wolf starts writing articles that throw around hocus-pocus & dilly-dallying with regularity, that’s a pretty big sign that the Fed / Treasury have gone rogue.
Houthis take key town leverage Red Sea even more.
Turn up the inflation screws.
WTI now $101 so PPI next month should be quite shocking. In retrospect, when the Fed said inflation was transitory, what they really meant was that the low rate they were reporting was transitory. In reality, it was a crouching lion, a hidden dragon.