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BLS ends calculation of 350 indexes due to underfunding

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Economists expect tariffs to drive up inflation soon

WASHINGTON, Aug 14 (Reuters) - U.S. producer prices

increased more than expected in July amid a surge in the costs

of services and goods, suggesting a broader pickup in inflation

in the months ahead.

The producer price index for final demand jumped 0.9%

last month after being unchanged in June, the Labor Department's

Bureau of Labor Statistics said on Thursday. Economists polled

by Reuters had forecast the PPI rising 0.2%.

Services prices soared 1.1%, the largest gain since March

2022, amid strong increases in machinery and equipment

wholesaling, costs of portfolio management, hotels and motels,

and road transportation of freight. Good prices vaulted 0.7%,

the biggest gain since in January. There were strong increases

in the prices of vegetables, meat and eggs.

With the July report, the BLS ended the calculation and

publication of approximately 350 indexes, including data from

the PPI Final Demand-Intermediate Demand, special index,

industry and commodity classifications.

The agency has suffered years of underfunding under both

Republican and Democratic administrations, a situation worsened

by an unprecedented campaign by President Donald Trump's White

House to remake the federal government through deep spending

cuts and mass layoffs of public workers.

The resource constraints have impacted the closely watched

employment report and also resulted in the suspension of data

collection for portions of the CPI basket in some areas across

the country. This has raised concerns about the quality of the

government-produced economic data, long viewed as the gold

standard. The nomination of Heritage Foundation economist E.J.

Antoni, a critic of the BLS, to head the statistics agency, is

also adding another layer of worry over data quality.

In the 12 months through July, the PPI increased 3.3% after

advancing 2.4% in June. The pass-through from Trump's sweeping

tariffs has so far been limited, but the PPI report supported

economists' expectations for the import duties to drive up

inflation in the coming months.

The government on Tuesday reported a mild increase in

consumer prices in July, though rising costs for services like

dental care and airline tickets caused a measure of underlying

inflation to post its largest gain in six months.

While financial markets have priced in an interest rate cut

from the Federal Reserve next month, rising services inflation

and the expectation tariffs could still significantly boost

goods prices left some economists doubtful of a resumption in

policy easing in the absence of labor market deterioration.

The U.S. central bank left its benchmark overnight interest

rate in the 4.25%-4.50% range last month for the fifth-straight

time since December.

Prior to the PPI report, economists estimated the Personal

Consumption Expenditures (PCE) Price Index, excluding the

volatile food and energy components, increased 0.3% in July

after a similar gain in June. That would raise the year-on-year

increase in the so-called core PCE inflation to 2.9% from 2.8%

in June. Core PCE inflation is one of the measures tracked by

the Fed for its 2% target.