Wholesale prices in the United States rose faster than expected in July, raising concern among some analysts about a possible pass-through to consumer prices. Fresh government data showed a 38% increase in the wholesale price of vegetables, the largest rise of any product category. Analysts said that if this continues, restaurant and retail prices could increase in the coming months.
At this stage, consumer prices have not reflected the wholesale increase. Government data showed that vegetable prices for shoppers remained unchanged from June to July. Over the past year, consumer vegetable prices rose by just 0.2%, compared with overall inflation of 2.7%.
When asked if tariffs were the cause of the July increase, analysts pointed to multiple factors. Wholesale vegetable prices fluctuate frequently, they said, citing weather conditions, supply chain constraints, tariffs, and labor costs. "People are really curious about when tariffs are likely to have consequences for consumers. We're all keeping an eye out," said Parke Wilde, food economist at Tufts University. "But I don't want to jump the gun based on one segment of one index."
The U.S. imports more than one-third of its fresh vegetables, according to USDA data. Analysts said that products with high import shares are more vulnerable to tariff-induced price increases. Importers of perishable produce face added challenges since stockpiling ahead of tariffs is not an option. "This could be the impact of tariffs," said David Ortega, food economist at Michigan State University. "But it could be a whole host of things."
Restaurant chain Sweetgreen reported earlier this summer that tariffs contributed to a 3.6 percentage point decline in profit in the second quarter compared with a year earlier. However, analysts said the July surge may still reflect weather-related shortages. Coffee, for example, has risen by more than 14% in the past year due to droughts in Brazil and Vietnam, according to U.S. Bureau of Labor Statistics data.
Labor availability is another factor. Roughly two-thirds of U.S. agricultural workers are non-citizen immigrants, according to a KFF analysis of Labor Department data. "There have been a lot of immigration raids across the country. Those could be impacting workers wanting to go into the field to harvest. And that could drive labor costs up and increase the prices of these items," Ortega said.
President Donald Trump has linked tariffs to revenue gains, saying in a social media post that consumers are not paying the tariffs directly. Analysts, however, continue to monitor the wholesale-to-retail price transmission. Wilde said that if wholesale increases persist, consumer vegetable prices could rise by more than 10%. "That would be a large price increase," he said.
Source: ABC News