Wednesday, September 10, 2025

This morning, we saw likely the most consequential series of data for today’s stock market: the Producer Price Index (PPI) for August, the wholesale level of inflation tracked within the U.S. economy. Both headline and core month-over-month PPI came in at -0.1% — a major cool-down from what we feared was heating up in July. Expectations for both were +0.3%.

Further, revisions to the prior month came down in tandem: from +0.9% posted on both headline and core PPI month over month to +0.7% on the revision. This is still the highest level of the past three years, but the takeaway here is that we’re not continuing to heat up. Market participants can breathe a sigh of relief this morning.

Year over year, we come down half a percentage point to +2.6% from a downwardly revised +3.1%. Again, we were looking at a rather striking chart-move higher off April lows as of July’s print, but this has cooled off as well. Core year over year also came in at +2.8%, 70 basis points (bps) lower than the prior-month revision of +3.4%. This amounts to a full percentage-point drop in initial reportage month over month on core yearly PPI.

When it comes to PPI (and tomorrow CPI, the retail side of inflation), we also look at ex-food, energy and trade, final demand, which slashed in half month over month to +0.3%. The only metric in this entire series to move the opposite direction is ex-food, energy and trade year over year, which ticked up 10 bps to +2.8% from July. 

Pre-market futures have reacted favorably, although they have drifted slightly in the time it’s taken me to write all this down. The Dow is actually flat at this hour, while the S&P 500 and Nasdaq are up +32 and +125 points, respectively — partly on yesterday’s big quarterly results from Oracle (ORCL Quick QuoteORCL - Free Report) , which you can read about here. The small-cap Russell 2000 is currently up +6 points.

What Do PPI Numbers Mean for the Fed?

As you almost certainly know already, the Federal Open Market Committee (FOMC) reconvenes for the first time since July next week, with a new policy decision on interest rates expected a week from today, at 2pm ET. The Fed has not moved on interest rates from their 4.25-4.50% range since December of last year, but all signs indicate a cut is coming.

That said, consider where the Fed believed we were two months ago: inflation metrics looked to be bubbling up somewhat based on tariff initiatives, and it was thought there were basically a million more jobs in the labor market than we understand there are today. As it turns out, inflation is now cooling and employment is clearly weakening. Perhaps the Fed is back to considering a 50 bps cut, instead of the 25 bps widely anticipated?

We’re still at least a day away from having a fully formed opinion on this. Tomorrow’s Consumer Price Index (CPI) numbers are even more important than today’s PPI, because they indicate how much of increased costs have been passed along to the consumer. For the past two months, the CPI Inflation Rate has been steady at a “warm-but-not-hot” +2.7%. Does it move from here, and in which direction?

Passing tariff costs along to customers looks like a fairly dicey proposition, by the way. Even though numbers illustrate that the consumer is carrying the least amount of the tax burden from ongoing tariffs, is this a sustainable position for companies going forward? Also, there remains the specter of future revisions to these figures released today. And we always advise against making too much of one set of data. Stay tuned…

Questions or comments about this article and/or author? Click here>>