Market Anticipates Moderate Rebound in Wholesale Prices
It is widely predicted that U.S. wholesale inflation for July will see a modest rebound from the previous month, indicating that businesses have a diminishing buffer against the impact of tariffs. Numerous institutions estimate that the Producer Price Index (PPI) may see a year-over-year increase higher than in June, with monthly comparisons returning to positive territory. This suggests that price pressures at the wholesale level may gradually transmit to the consumer side in the coming months.
Several analysts note that over the past year, companies have absorbed additional costs from tariffs by compressing profits and adjusting supply chain structures, but recent signs indicate that this ability to absorb is weakening. With the expansion of tariff coverage, cost pressures may more swiftly pass on to retail prices.
Clearer Cost Transfer Path
Recent analysis from research institutions shows that during the first half of this year, U.S. companies shouldered most of the tariff impact, but this proportion is expected to decline rapidly in the second half. Many manufacturers and retailers are considering directly passing more costs to consumers, especially in a high inflation context where price sensitivity might delay but cannot prevent the ultimate pass-through of price increases.
Some economists emphasize that producer prices often lead consumer prices by 1-3 months; therefore, changes in the July PPI will be a crucial indicator for forecasting future CPI trends. If wholesale prices continue to rise, consumer inflation could see an unexpected rebound by year-end.
Dual Pressure of Tariffs and Policy Changes
This year, the effective level of U.S. tariffs has significantly risen from the low levels at the beginning of the year, covering more imported goods. Meanwhile, the impending expiration of the "duty-free threshold for imports under $800" policy at the end of August poses a potential risk. Should the policy lapse, many retail products will face higher import costs, directly increasing end prices.
Several institutions estimate that this policy expiration alone could add approximately one percentage point to core inflation levels. Although such policy shocks are short-term, they may become apparent during the holiday shopping season, exerting greater pressure on consumer sentiment.
Diverging Economic Growth Expectations
Despite the increased short-term risk of rising prices, most economic institutions still believe that this round of wholesale inflation's upward momentum is limited, with monthly growth possibly remaining between 0.3%-0.5%, having a limited impact on the full-year inflation center. Thus, the possibility of the Federal Reserve initiating a rate cut in late 2025 remains.
However, before rate cuts, ongoing price increases may suppress consumer spending inclination, especially among lower-to-middle-income groups. Slowing consumption might become an important factor dragging down economic growth in the second half of the year.
Year-End Trends May Become Key Observation Period
According to comprehensive institution forecasts, although there is a slight upgrade in U.S. GDP growth for the second half of the year, it remains in the low range. Some analysts suggest that if tariff and policy impacts do not exceed expectations, the economy may visibly recover by 2026; conversely, if price pressures persist and lead to cooling consumer spending, the economic adjustment cycle may be prolonged.
In the coming months, wholesale price trends will be closely monitored by markets and policymakers. Should inflation pressures be concentrated at year-end, not only will consumer spending be tested, but the Federal Reserve's policy path may also require reevaluation.
