The US Producer Price Index for July 2026 was released today.
Errors or inaccuracies are possible. Spotted something that looks wrong? Write to me and I will correct it.
The Numbers
| Twelve-month change | July 2026 |
|---|---|
| Final demand | 4.7% |
| Less foods and energy | 4.2% |
| Less foods, energy and trade services | 4.7% |
| Goods | 6.5% |
| Services | 3.9% |
| Monthly change, seasonally adjusted | July 2026 |
|---|---|
| Final demand | -0.03% |
| Less foods and energy | 0.2% |
| Less foods, energy and trade services | 0.4% |
| Goods | -0.7% |
| Services | 0.2% |
| Food | -1.3% |
| Energy | -0.6% |
| Goods less foods and energy | 0.9% |
The Month: What the Headline Hid
The headline index barely moved. At the index level: 156.563 in July against 156.607 in June, a decline of 0.03%. A figure like that is usually called "unchanged", and that is how the headline reads.
But it is made of two movements that cancel each other out. Food fell 1.3% and energy fell 0.6%
- the two volatile lines every central bank strips out. And in that same month, core goods rose 0.9%.
0.9% in a single month is an annual pace of about 11.4%, were it to continue.
This is the monthly increase pulling the core index up while the headline sits flat. It is also the line that normally carries the effect of tariffs, since it measures physical goods rather than services.
One month is not a trend, and it needs to repeat in August to become one. But it is the meaningful movement in this report.
The Reversal: Goods Against Services
In the years after the pandemic the pattern was constant: services ran hot, goods were flat and at times in deflation. In July 2026 the picture is reversed:
| For the year | |
|---|---|
| Goods | 6.5% |
| Services | 3.9% |
The gap is 2.6 percentage points in favour of goods. That is a change of character, not monthly noise.
And Yesterday, the Consumer Price Index Said the Opposite
This is the point that deserves attention. In the piece on the July Consumer Price Index I wrote that core goods rose just 0.8% for the year, and that the pressure was in services rather than goods.
Today's report says that at the producer level, goods rose 6.5% for the year.
How can the two indices say opposite things about the same month?
Because they measure different stages of the chain. The Producer Price Index measures the price the domestic producer receives; the Consumer Price Index measures the price the consumer pays at the till.
When the gap opens in this direction there are only two possibilities: either the increase in costs is passed to the consumer in the coming months, or it is absorbed in the margin of whoever sits in the middle - the producer, the importer and the retailer.
What This Index Does Not Say
The two indices are not directly comparable, and one must not be derived from the other by simple arithmetic.
The Producer Price Index measures the output of domestic producers and excludes imported goods; the Consumer Price Index includes them. The baskets differ, the weights differ, and trade services within the producer index measure the margins of wholesalers and retailers rather than product prices.
So the gap between 6.5% and 0.8% is not a gap that "will close." It is a signal of direction, not a forecast of magnitude.
The Context: The Annual Pace Is Actually Slowing
| Final demand, annual change | |
|---|---|
| March | 4.3% |
| April | 5.7% |
| May | 5.9% |
| June | 5.5% |
| July | 4.7% |
The peak was in May, and the pace has fallen since. The same holds in the core: 4.9% in April, 4.7% in June, 4.2% in July.
This is the picture that supports the argument that pressure is easing. It is correct - and it does not contradict what is written above. The annual pace is slowing mainly because hot months from 2025 are dropping out of the calculation, while the most recent monthly movement is in fact strengthening in one specific line.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
The number I am watching is 0.9%, not 4.7%.
The annual pace is a rear-view mirror: it is falling mostly because the base a year ago was high. The monthly movement is what is happening now, and this month it is concentrated in one place - core goods.
And why that matters right now: this is precisely the line that should carry the effect of tariffs. If August brings another reading like this one, it becomes a trend rather than noise, and the question moves from "whether" to "who absorbs it".
And whoever absorbs it is not always the consumer. If the costs lodge in the margins of producers and retailers, they will not show up in the Consumer Price Index - they will show up in third quarter results, in the gross profit line. That makes this report relevant to earnings season and not only to the Federal Reserve.
What I would watch from here: whether core goods come back above 0.5% in August, and whether the gross margins of retailers and manufacturers begin to crack in the third quarter.
(An important note: this is my personal opinion only, and nothing here is a recommendation to take any action.)
