Wholesale Inflation Tops Forecasts
U.S. producer prices increased more than expected in January, reinforcing concerns that inflation remains persistent at the wholesale level.
The Labor Department reported that the Producer Price Index rose 0.5% from December and 2.9% compared with January 2025. Economists surveyed by FactSet had projected a 0.3% monthly gain and a 1.6% annual increase.
Core producer prices, which exclude food and energy, advanced 0.8% month over month and 3.6% from a year earlier. The annual core reading marked the strongest pace since March last year.
Services Lead Gains as Margins Expand
The acceleration stemmed largely from higher costs in services, particularly expanded profit margins among retailers and wholesalers. Analysts suggested companies may be absorbing and passing along costs linked to tariffs.
Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, noted that retailers have continued raising prices despite some easing in tariff expenses.
Core goods prices climbed 0.7% from December and 4.2% year over year. Increases were notable in cosmetics, pet food, certain metals, and metal-processing machinery.
Energy prices declined, with gasoline down 5.5% from the prior month and 15.7% from a year earlier. Wholesale food prices also decreased.
Implications for Consumer Prices and Policy
The wholesale report follows recent data showing consumer prices rising 2.4% year over year, moving closer to the Federal Reserve’s 2% target.
Wholesale measures often provide insight into future consumer inflation, particularly as components such as health care and financial services feed into the Personal Consumption Expenditures index, the Fed’s preferred gauge.
In December, annual PCE inflation reached 2.9%, its strongest reading since March 2024.
The Federal Reserve reduced interest rates three times last year to support the labor market but has remained cautious about further cuts. Ben Ayers, economist at Nationwide, said the latest producer price data reinforces expectations that policymakers will stay on hold at their upcoming March meeting.
