Dem
47
GOP
53
The Producer Price Index measures the average change in prices paid to businesses that produce goods. The latest numbers are out, and they are not good news for anyone who believes in tariffs. Specifically, in July, prices rose by 0.9%, the biggest monthly increase in 3 years (and that previous mark was, of course, set during the pandemic). By way of comparison, the increase in June was 0.2%. People who interpret these numbers for a living infer from this that producers were eating the costs of tariffs, but they are no longer willing and/or able to do so, and so are passing them on.
This is a leading indicator, of course, because eventually most of those goods will be sold by retailers, who will pass the added costs onto consumers. Further, the full extent of the tariff damage has not yet been wrought. After all, the tariffs that have kicked in only did so fairly recently. And, on top of that, not all the tariffs have kicked in yet. There are the pauses that have been granted to China and Mexico, and the grace period for goods that were already in transit. Another factor is that customers are often angered by price increases, such that it's better PR to have one bigger price increase as opposed to several smaller ones. So, some businesses are waiting to see how things are likely to shake out, before implementing what they hope will be a one-time increase due to tariffs.
Yesterday, even Fox was compelled to admit that this appears to be a byproduct of Trump's trade war. Admittedly, it was Fox Business, where the staff is rather more serious about facts than the entertainers who work at the "news" operation across the hall. Financial analyst Adam Johnson said:
Not what we wanted to see, not what anyone wanted to, but I think this is tariffs. And we're finally seeing tariffs percolate through the data. What's curious in particular is that the trade component, the line item where it just says trade, and that's about one-fifth of the CPI calculation, up 2%. So lest there be any doubts about where this is coming from, there it is.
With that said, it's still a Fox channel. So, Johnson optimistically predicted that it is a "one-time shift."
We are not financial analysts, but we are obviously skeptical of that conclusion. First, because the effects of the tariffs have not fully manifested, for the reasons we note above. Second, we see no reason to think the effect would be limited to just one month (or even one quarter), and Johnson didn't really explain why it might work that way.
Regardless of whose prognostications are correct, it is nonetheless the case that if prices rise, and stay risen, that is a problem for the party in power. And if you add a tariff-driven price-jump, even if it's "a one-time shift," on top of normal inflation and the expected reduced purchasing power triggered by the BBB, it could be a BIG problem for the party in power. (Z)