Here's what new data from the producer price index says about where inflation is headed, according to economists.

The cost of wholesale goods and services — where rising inflation tends to show up first — in July posted the biggest increase in three years, possibly heralding a sizable acceleration in price increases tied to higher U.

Dean Smith, chief strategist and portfolio manager at FolioBeyond, says Thursday's (August 14) stronger than expected producer price index is a sign that tariffs are starting to boost prices.

The producer price index (PPI) for final demand rose 0.9% month-over-month after a flat reading in June. Core PPI, which excludes food and energy prices, rose 0.9% month-over-month after a flat reading in June. In July, the PPI for finished goods rose 0.5% month-over-month, up from 0.4% in June.

The producer price index for July suggests companies may be feeling the sting of inflation and consumers could be next.

Earlier this week, falling bond yields and growing expectations for aggressive Federal Reserve interest-rate cuts in the months ahead helped spark a rotation away from what had been working in the U.S.

US stocks fell on Thursday as wholesale inflation accelerated by the most in three years, halting a risk-on rally that helped set fresh record highs.

U.S. stock index futures slipped on Thursday after hotter-than-expected producer prices data contrasted with recent tame consumer prices data that had boosted bets of Federal Reserve interest rate cuts this year.