Inflation indexes showed mixed results this week – On Tuesday, the Consumer Price Index (CPI) for July was released. It showed that consumer prices rose 2.7% from one year ago, unchanged from June and below analysts’ expectations of a 2.8% increase. The core CPI rate, which excludes food and energy, rose 3.1% from one year ago. That was slightly above the 3% analysts forecasted. That was viewed very positively by investors. While the CPI rate has gone up from 2.3% in April to 2.4% in May and 2.7% in June and July, that was not as much as economists expected due to higher prices because of tariffs. Unfortunately, on Thursday, the Producer Price Index (PPI) was released. That showed that wholesale prices increased 0.9% month-over-month in July, the highest monthly increase since June 2022, when inflation spiked to its highest level since the 1980s. Year over year, the increase was 3.3% for headline CPI and 3.7% for Core PPI. The 0.9% month-over-month increase for both headline and core PPI took investors by surprise. Wholesale inflation is usually a precursor to consumer inflation, as the increase in cost is later passed on to the consumer. This monthly increase was so steep that investors took a wait-and-see attitude because it’s just a number that doesn’t look right. Bond yields and mortgage rates, which hit a 10-week low earlier in the week, rose a little at the end of the week after the PPI report, but nowhere near where they would have gone had investors not been skeptical of the PPI report.
