One inflation measure significantly higher than expected

July’s headline Producer Price Index (final demand) rose 0.9% m/m and 3.3% y/y, the biggest monthly gain in roughly three years. Services prices jumped 1.1% (with trade services margins +2.0%), while goods rose 0.7%; the “core” gauge that excludes food, energy, and trade services increased 0.6% m/m and 2.8% y/y. Metals-heavy inputs showed eye‑catching moves consistent with tariff pass‑through: aluminum mill shapes +7.4% m/m (+13.7% y/y) and copper & brass mill shapes +5.7% m/m (+6.9% y/y) in July.  Markets pushed out near‑term Fed‑cut expectations after the release, with coverage noting a “hot” wholesale inflation print complicating the easing path.

• The PPI number stands in stark contrast with last week's Consumer Price Index (CPI), which came in as expected
• This could give us some insight into how tariffs are flowing through the economy
• The cost of tariffs ultimately needs to be borne by some combination of the exporter, the importer, and the end consumer
• The surge in PPI, but not yet in CPI, could signal that tariffs are beginning to be felt by the importing companies, which are not passing the costs through to the consumer
• That said, we are only a few months into Trump’s tariff regime, so much is yet to be determined
• It is also important to recognize that tariffs are a one-time adjustment to prices, rather than consistent inflation

Ethereum surges

Ethereum surged as much as 20% during the week, before ending the week up a little north of 10%.  U.S. spot Ether ETFs saw a record >$1 billion net single‑day inflow on Mon, Aug 11, the first time crossing that mark, with cumulative ETF inflows now around $10.8B and total ETF AUM ≈ $25.7B. Bloomberg reports month‑to‑date (through Aug 13) Ether ETF net inflows >$1.7B, while Bitcoin funds registered outflows over the same stretch. Another heavy $729M flowed in on Wednesday, the second‑largest daily tally on record. Together, these flows underscore accelerating institutional uptake of Ethereum via regulated vehicles, even amid broader crypto volatility.

• The price rise of Ethereum outpaced Bitcoin this week
• This is likely tied to more companies and products announcing crypto treasury strategies, now including Ethereum in addition to Bitcoin
• The idea behind crypto treasury originated with MicroStrategy, which began accumulating Bitcoin as its core strategy
• Since the industry has received additional regulatory clarity, more companies have come out announcing crypto treasury strategies
• Ethereum stands to benefit as many see it as the network upon which the future of financial infrastructure will run on
• For instance, while still nascent, about 50% of stablecoins are currently issued on Ethereum
• As stablecoin adoption becomes more mainstream, it should create more demand for Ethereum (as well as some competing chains)

Consumer confidence softens

The University of Michigan’s preliminary Consumer Sentiment Index for August fell to 58.6, down sharply from 61.7 in July and missing expectations of 61.9. This 5% monthly decline marks the first setback in four months, reflecting heightened anxiety about inflation and unemployment. Notably, the reading for buying conditions on durable goods plunged about 14%, hitting its lowest level in a year. Expectations for year‑ahead inflation rose to 4.9% (from 4.5%), while long-run inflation expectations increased to 3.9% (from 3.4%). Overall, the deterioration underscores growing unease among consumers despite broader economic resilience.

• While very popular, the University of Michigan Consumer Sentiment Index is derived via a phone survey conducted monthly
• Surveys, especially phone surveys, are prone to errors, given that people may not answer honestly, as well as a bias in who may actually answer a phone survey
• That said, it is still useful as a month-over-month gauge of the state of the consumer
• While the numbers were weak, the most troubling element was the inflation expectations number, which rose and remains elevated
• If consumers are concerned about inflation, they may accelerate spending, which creates a self-reinforcing effect (demand surges, prices rise, expectations rise, demand surges… )
• In contrast to the poor sentiment survey, retail sales surged 0.5% last month, and the prior month gains were revised higher to 0.9%
• While the retail sales numbers adjusted for inflation were relatively flat, it does show the consumer is still spending, even at elevated price levels

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