Team,
This is my piece on the July Producer Price Index (PPI) report released this week. You can also read it HERE in RealClearMarkets.
One day after July’s Consumer Price Index (CPI) report told the Fed hawks to stand down (you can read my piece on that report HERE), this week’s Producer Price Index delivered the same broad message from upstream in the economy.
Final demand producer prices were flat in July. Wall Street expected a 0.2 percent increase. On a year-over-year basis, headline PPI rose 4.7 percent, also below expectations.
That is another warning to the Eccles Building: do not invent an inflation crisis the data do not show.
Start with goods. Final demand goods prices fell 0.7 percent in July. Energy goods fell 3.1 percent. Food prices fell 0.9 percent. Those are not the numbers of a producer-price spiral. They are the numbers of an energy and goods-side cooling process still moving through the pipeline.
This week’s PPI also undercuts the tariff-inflation panic. If tariffs were setting off a broad inflation bomb, final demand goods would not be falling. Energy goods would not be falling. Food prices would not be falling. Goods less food and energy would not be rising by only a tenth.
This is not what broad tariff inflation looks like.
That does not mean tariffs are irrelevant. It means the real tariff story is enforcement.
That is where The Great Transshipment Scam comes in. Read the report my office has just released as it is an eye opener: more than 40 countries comprise a Shadow Transshipment Network cheating Americans out of tens of billions of dollars in tariff revenues and thousands upon thousands of displaced jobs.
I strongly encourage you to read my new 24-page report on The Great Transshipment Scam HERE.
And you can read my introductory piece for the report HERE in the New York Times.
Tariffs work only if they are collected. When Chinese and other higher-tariff goods are routed through lower-tariff countries, relabeled, lightly processed, repackaged, or papered over with false country-of-origin claims, America loses the revenue, American producers lose the protection, and cheaters keep their back door into the U.S. market.
The scandal is not tariff inflation. The scandal is tariff evasion — a global shell game in which higher-tariff goods are laundered through lower-tariff countries and sent into the American market under a false flag. That cheats the Treasury out of tens of billions, cheats American workers out of protection, and cheats honest companies that follow the rules.
For the Fed, the proper response is discipline. Watch the data. Watch expectations. Watch pass-through. But do not punish American workers, homebuyers, manufacturers, and builders.
For trade policy, the proper response is enforcement. Tighten rules of origin. Crack down on false paperwork. Stop transshipment. Make sure tariffs change production behavior — not just labels, routes, and invoices.
PPI confirms CPI. The rate-hike case is weaker. The tariff-inflation scare is weaker. The case for enforcing America’s trade laws is stronger than ever.
I always appreciate your comments. Please be sure to share.
Peter
August 13, 2026
One day after July’s CPI report told the Fed hawks to stand down, today’s Producer Price Index delivered the same broad message from upstream in the economy.
Final demand producer prices were flat in July. Wall Street expected a 0.2 percent increase. On a year-over-year basis, headline PPI rose 4.7 percent, also below expectations.
That is another warning to the Eccles Building: do not invent an inflation crisis the data do not show.
Start with goods. Final demand goods prices fell 0.7 percent in July. Energy goods fell 3.1 percent. Food prices fell 0.9 percent. Those are not the numbers of a producer-price spiral. They are the numbers of an energy and goods-side cooling process still moving through the pipeline.
Services were firmer, rising 0.2 percent. Trade services — a volatile margins category — actually fell 0.1 percent. The sticky spot was core PPI, excluding food, energy, and trade services, which rose 0.4 percent, a tick hotter than expected.
That caveat matters. No serious analyst should claim producer inflation has vanished. Core producer inflation remains elevated over the year, and the Fed should keep watching pass-through channels: transportation, logistics, packaging, chemicals, plastics, food distribution, airfares, and business services.
But vigilance is not the same as panic. And it is certainly not the same as a rate-hike reflex.
The key point is composition. Demand inflation, wage-price inflation, tariff inflation, housing inflation, and energy-shock inflation are not the same animal. They do not have the same cause. They do not require the same policy response.
If producer prices are being pushed around by energy, food, margins, and supply-chain reconfiguration, a blunt rate hike is the wrong tool. The Federal Reserve cannot drill a barrel of oil, refine gasoline, secure a shipping lane, or deter Iran with a rate hike. What it can do is crush housing, chill factory construction, raise financing costs, slow capital investment, and sabotage the industrial turn now underway.
That would be macroeconomic malpractice. Just read the history books on Greenspan and Bernanke.
Today’s PPI also undercuts the tariff-inflation panic. If tariffs were setting off a broad inflation bomb, final demand goods would not be falling. Energy goods would not be falling. Food prices would not be falling. Goods less food and energy would not be rising by only a tenth.
This is not what broad tariff inflation looks like.
That does not mean tariffs are irrelevant. It means the real tariff story is enforcement.
That is where The Great Transshipment Scam comes in. Read the report my office has just released as it is an eye opener: more than 40 countries comprise a Shadow Transshipment Network cheating Americans out of tens of billions of dollars in tariff revenues and thousands upon thousands of displaced jobs.
Tariffs work only if they are collected. When Chinese and other higher-tariff goods are routed through lower-tariff countries, relabeled, lightly processed, repackaged, or papered over with false country-of-origin claims, America loses the revenue, American producers lose the protection, and cheaters keep their back door into the U.S. market.
The scandal is not tariff inflation. The scandal is tariff evasion — a global shell game in which higher-tariff goods are laundered through lower-tariff countries and sent into the American market under a false flag. That cheats the Treasury out of tens of billions, cheats American workers out of protection, and cheats honest companies that follow the rules.
Viewed against yesterday’s CPI, today’s PPI is corroborating evidence. Consumer inflation cooled. Producer headline inflation came in below expectations. Goods prices fell. Energy fell. Food fell. Core producer prices bear watching, but one firmer core reading does not erase the broader pattern.
For the Fed, the proper response is discipline. Watch the data. Watch expectations. Watch pass-through. But do not punish American workers, homebuyers, manufacturers, and builders because one component of one report came in a bit hot.
For trade policy, the proper response is enforcement. Tighten rules of origin. Crack down on false paperwork. Stop transshipment. Make sure tariffs change production behavior — not just labels, routes, and invoices.
PPI confirms CPI. The rate-hike case is weaker. The tariff-inflation scare is weaker. The case for enforcing America’s trade laws is stronger than ever.
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