By Alicia Wallace, CNN

(CNN) — Costs were sharply on the rise for producers and manufacturers in July, a sign that higher prices could soon filter down to American consumers.

US inflation on the wholesale level picked up steam last month, with prices rising by the fastest monthly pace since June 2022, new data showed Thursday.

The latest Producer Price Index, which measures the average change in prices paid to producers, jumped 0.9% from June, lifting the annual rate to 3.3%, according to Bureau of Labor Statistics data. PPI serves as a potential bellwether for the prices consumers may see in the months ahead.

“Producers are starting to feel the inflation fire heat,” Chris Rupkey, chief economist at FwdBonds, wrote Thursday. “It will only be a matter of time before producers pass their higher tariff-related costs on to the backs of inflation-weary consumers.”

Thursday’s readings far exceeded economists’ expectations for prices would rise by just 0.2% in July and 2.4% annually.

The Dow fell 175 points, or 0.4%, at the opening bell on Thursday. The broader S&P 500 fell 0.35% and the tech-heavy Nasdaq Composite dropped 0.3%.

Earlier this week, the Consumer Price Index for July showed that falling gas prices kept a lid on overall consumer price hikes but that tariff-sensitive goods continued to get more costly.

“The large spike in PPI this morning shows inflation is coursing through the economy, even if it hasn’t been felt by consumers yet,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management. “Given how benign the CPI numbers were on Tuesday, this is a most unwelcome surprise to the upside and is likely to unwind some of the optimism of a “guaranteed” rate cut next month.”

Traders pared their bets that the Federal Reserve would cut its benchmark lending rate at its September meeting.

Excluding food and energy, core PPI also shot higher by 0.9%, sending the annual rate to 3.7%, the highest level since March.

This story is developing and will be updated.

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