June 1, 2026

The below transcript is a translation of the podcast audio that has been machine generated by Adobe Podcast.

Hi, everyone. This is Taylor St Germain with ITR economics. Thanks so much for joining me on this episode of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence. And today I wanted to talk inflation, but the producer side of inflation. If you want to hear more on the consumer side of inflation and interest rates, check out our episode last week where I talked with my colleague Lauren about that side of inflation. This week, I wanted to talk about the producer side of inflation.

When I talk about the producer price index, or as many of you here refer to as the PPI, that really represents the cost of doing business reality. It’s measuring the average selling price of finished goods and services here in the United States. So it’s much more applicable to margins to the business side of the equation. The reason I am bringing the PPI into our conversation today is because we upgraded our PPI forecast. Previously, we were forecasting about 3.4% inflation on the PPI in 2026. Given the recent events with the situation in Iran, some continued upward momentum in commodity prices, we made a revision to that forecast instead of 3.4% for 2026, we are now forecasting a number that’s 5% for 2026. And this is important for us to call out because a lot of folks benchmark their pricing strategy for the year based on PPI expectations. So instead of that 3.4%, we’re talking 5% this year.

There were a number of factors that led to this. When we looked at the March to April percent change in the PPI, it was a significant surge. There were important impacts, not just oil prices, we saw an increase in gasoline prices, fertilizer, plastics, commodities like copper, aluminum and steel. And I wanted to call out where some of these commodities are. I look at the commodities on a 3/12 rate of change basis, so that’s looking at the most recent three months compared to the same three months one year ago. At the time of this recording, the 3/12 growth rate for aluminum is up 35.8%. For oil it’s up 25.8%, 24.3% for copper, and about 5% for steel. We expect many of these commodities, not all, but a number of these growth rates to continue to increase as we move into the second half of this year. There’s a tariff impact to this. There’s the supply chain impacts with the situation in Iran.

Pricing continues to be the primary challenge for 2026. This is not new, despite the mild upgrade in our forecast for the PPI, we have been talking about this for quite some time. It gets back to this idea of profitless prosperity. You’ve all heard this term from me so many times at this point. But it continues to fuel that fire, which is, yes, we still have economic growth ahead of us, we’re forecasting GDP expansion, industrial production, expansion, but we continue to feel these higher cost pressures, these higher inflationary pressures. And that’s the challenge with profitless prosperity. It is becoming even more important to look at these individual inputs as it relates to your business that ultimately make up the PPI. Because if I gave you our 5% PPI number with the upgraded forecast and said you need to lift prices this year 5%, but yet you have copper or aluminum as inputs into your process. When those are up 25, 35%, then I’m misleading you by just telling you that PPI number. So it is important for me to highlight, yes, we’ve upgraded this inflation outlook, but it is an important reminder, don’t just run with the overall CPI or PPI number when you’re thinking about price increases, you have to get a lot more granular into looking at some of these individual commodities. It’s very important when we talk about maintaining profit margins in the wake of all of this inflation.

So again, folks, the takeaway from our PPI forecast is, in 2026 we have producer price inflation up 5%, in 2027 1.6%, so a slower rate of inflation along with the slowing economy next year. And then in 2028, we’re back to 3.3%. Yes, there are certain years where this PPI number is going to be accelerating versus slowing, but I’m still talking about positive numbers for the next three years, which is right in alignment with our forecast we had published previously. You have three consecutive years of higher costs coming your way if you are running a business, and that is something we need to have an answer for. And again, from my perspective, we cannot rely on price increases alone. That is not going to be enough to offset this type of inflation to protect your margins, we have to find ways to drive our efficiency, drive our productivity, innovate, automate as we look at protecting these margins.

I have to give a shout out to our team too. We published our previous PPI forecast in April of 2024, and as of the end of the first quarter of 2026, about a year and a half later, their accuracy was 99.2%. So a big shout out to the forecasters, as always, for making what I say on TrendsTalk sound great and look great because   we’ve got a great team behind us that is very accurate in their forecasting. But it was time, given these geopolitical events to upgrade this forecast. For those of you that are Trends Report subscribers, please head over to our website, to our portal, our onDemand portal, log in there, access your Trends report and take a look at this updated forecast, it’s in the financial module of our Trends Report. As always, I’m here for any questions that you have. Please connect with me on LinkedIn, send any messages through our website to our team, we’re here to help. But for now, we’ll continue to keep you updated on inflation. But I hope you found this information helpful. Please like and subscribe to TrendsTalk wherever you listen to your podcasts, and look forward to seeing you all in the next one. Thanks so much. Take care for now.