US July PPI Preview: Inflation’s Second Test Could Shake Fed Rate Bets

Key Takeaways

• The US Producer Price Index for July will be released on August 13 at 8:30 a.m. ET, or 8:30 p.m. Singapore time. Headline PPI is expected to rise 0.2% month over month after falling 0.3% in June.
• Core PPI is forecast to increase 0.3%, accelerating slightly from June’s 0.2% gain.
• The report arrives one day after July CPI and will provide a second test of the disinflation narrative as markets reassess the possibility of another Federal Reserve rate hike.
• Richmond Fed President Tom Barkin is scheduled to speak just 10 minutes after the data, raising the risk of a sharp “PPI aftershock” across bonds, the dollar, gold and technology stocks.

The United States will release its July Producer Price Index on Thursday, August 13, giving investors another crucial reading on inflation only 24 hours after the Consumer Price Index report.

The Bureau of Labor Statistics’ official calendar confirms that the figures will be published at 8:30 a.m. Eastern Time. Market forecasts point to a 0.2% monthly increase in headline producer prices, reversing part of June’s 0.3% decline. Core PPI, which excludes food and energy, is expected to rise 0.3% after gaining 0.2% in June.

The release could determine whether the market treats July CPI as evidence of a sustained cooling in inflation or merely a temporary improvement.

June’s PPI Decline Set a High Bar

Producer inflation cooled substantially in June. Headline PPI fell 0.3% month over month, missing expectations for an unchanged reading, while the annual rate slowed to 5.5% from 6.0%.

Core producer prices were more resilient, rising 0.2% during the month. That divergence showed that falling energy costs were responsible for much of the improvement in the headline figure, while underlying service-sector and supply-chain pressures remained present.

July’s expected 0.2% rebound would therefore not necessarily signal a renewed inflation shock. Investors will instead examine the composition of the report, particularly prices for services, transportation, warehousing, trade margins and energy-related goods.

A stronger-than-expected increase across several categories would be more concerning than a headline rise driven largely by volatile energy prices.

PPI Will Test the Message From July CPI

July CPI is scheduled for release on August 12. Economists currently expect annual headline inflation to ease to approximately 3.4% from 3.5%, while core inflation is forecast to moderate to around 2.5%.

If CPI meets or falls below those forecasts, a subdued PPI report the following day would strengthen the argument that the earlier inflation acceleration is losing momentum. It could also reinforce expectations that the Federal Reserve will keep interest rates unchanged at its September meeting.

However, a soft CPI followed by an unexpectedly strong PPI would create a more complicated picture. Producer prices do not pass through to consumer inflation automatically, but sustained increases in business costs can eventually affect retail prices and corporate profit margins.

PPI also includes several components that feed into calculations for the Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation measure. For that reason, economists will look beyond the headline number when updating forecasts for July core PCE.

Weak Employment Data Raises the Stakes

The inflation reports come after a surprisingly weak July employment report. The US economy lost 23,000 jobs, compared with forecasts for roughly 80,000 new positions. May and June payroll growth was also revised lower by a combined 103,000 jobs.

The unemployment rate declined to 4.1%, but the drop reflected weaker labor-force participation rather than stronger hiring. The data strengthened evidence that the US labor market has entered a low-hiring environment.

Following the report, market expectations for a September rate increase fell to approximately 43%-45%, down from around 60% before the employment figures. The combination of negative payroll growth and cooling inflation would make another increase more difficult for the Fed to justify.

Nevertheless, inflation remains above the central bank’s 2% objective. The Fed’s latest Monetary Policy Report highlighted persistent price pressures associated with tariffs, energy costs and broader supply disruptions.

Barkin Speech Could Amplify the Market Reaction

Investors will have little time to digest the PPI figures before receiving fresh commentary from the Federal Reserve.

Richmond Fed President Tom Barkin is scheduled to address the Greenville Chamber of Commerce at 8:40 a.m. ET—just 10 minutes after the inflation report. The event will also include an audience question-and-answer session and a separate media briefing, according to the Richmond Federal Reserve.

Barkin’s assessment of the CPI and PPI reports could intensify the initial market reaction, particularly if he addresses whether weaker employment outweighs lingering inflation risks.

Other policymakers have recently maintained a cautious tone. Fed Governor Lisa Cook has said she would support tighter policy if inflation remains persistently elevated, while Chair Kevin Warsh has emphasized that the central bank has little tolerance for inflation without signaling the timing of its next move.

What the July PPI Could Mean for Markets

A headline reading below 0.2%, accompanied by soft core and services components, would likely reduce September rate-hike expectations further. Treasury yields and the dollar could decline, while gold, bonds and high-valuation technology shares may benefit.

A reading close to expectations would keep attention on the details of the report and Barkin’s remarks. Markets would probably continue treating a September increase as possible but far from certain.

A headline gain of 0.4% or more, especially alongside strong core services prices, could produce the largest reaction. Such a result would challenge the disinflation narrative, push Treasury yields and the dollar higher, and potentially pressure gold and growth stocks.

July PPI will therefore serve as more than a secondary inflation release. Coming immediately after CPI and just before fresh Fed commentary, it could either confirm that price pressures are retreating or deliver an inflation aftershock that forces markets to reconsider the path of US interest rates.