Choppiness has returned to the markets with the latest rise in the Producer Price Index (PPI). It is likely that increased production costs will be passed on to the consumer, making it harder for the Federal Reserve to cut rates in September.
Producer Price Index (PPI) – July 2025 - Producer prices (PPI) surged 0.9%, the largest jump since mid-2022, pushing the annual rate to 3.3%. - Goods (wholesale): Up 0.7%, notably in food, metals, and electronics, partly driven by tariffs. - Services (wholesale): Rose 1.1%, with trade margins and portfolio management fees especially strong.
What’s Fueling These Trends? - Tariffs continue to add pressure—import-heavy categories like electronics, food, and metals are seeing rising prices, though businesses have so far absorbed much of the cost. - Service inflation is proving persistent—sectors like healthcare, airlines, and housing are increasingly inflating headline CPI. - Energy’s downward movement is providing some relief, particularly via lower gasoline costs.
But this is not the whole story about inflation as we have also a considerable amount of contributors, which are actually falling. A quick overview: Consumer Price Index (CPI) – July 2025 Rising Components
Core CPI (ex‑food & energy): Grew 0.3% month-over-month, the biggest uptick since January. - Annual core CPI is 3.1%, well above the Fed’s 2% target. - Shelter: Up 0.2% in July; year-over-year, it’s +3.7%. - Medical care: Rose 0.7% in July, bringing annual growth to about 3.5%. - Dental services: Jumped 2.6% for the month. - Hospital services: Increased by 0.4%. - Airline fares: Surged 4.0% in a single month. - Household furnishings & operations: Climbed 0.4%. - Used cars and trucks: Up 0.5%. - Personal care & recreation: Each rose 0.4%.
Cooling or Declining Items - Energy: Overall energy prices fell 1.1% in July. - Gasoline: Down 2.2% for the month; –9.5% year-over-year. - Electricity: Slight dip of 0.1%. - Natural gas: Declined by 0.9%. - Prescription drugs: Fell 0.2% in July. - Lodging away from home: Dropped 1.0%. - Communication services: Down 0.3%.
Sector Rotation: The hefty rotation out of Tech into Small Caps, after the release of CPI data, earlier this week, yesterday the PPI data triggered a rotation back into Big Tech, which is less sensitive to higher yields.
Technical Outlook We have just broken through a major sell zone to reach a new all-time high (ATH). The market then pulled back to retest the breakout level, where buyers stepped in. The S&P 500 Indicator has slipped slightly, with uncertainty remaining elevated. A sharp sell-off is not expected under current conditions; instead, a time-based pullback followed by a resumption of the bullish trend appears plausible—at least through the end of August. Seasonality, however, turns bearish in September.