U.S. Producer Prices Come in Hot at 2.9% as Inflation Pressures Persist
According to the U.S. Bureau of Labor Statistics, the Producer Price Index (PPI) for final demand rose 0.5% month over month in January, above the 0.3% estimate and matching December’s pace.
Key Takeaways
- US producer prices rose 0.5% in January, above expectations and matching December, signaling persistent upstream inflation.
- Annual PPI accelerated to 2.9%, beating the 2.6% forecast.
- The upside was driven by services (+0.8%), while goods declined (-0.3%) mainly due to lower energy prices.
- Core PPI (ex food, energy, trade) increased 3.4% y/y, extending its steady upward trend.
On a yearly basis, producer prices increased 2.9%, also exceeding expectations of 2.6%. The stronger reading suggests that inflationary pressures at the wholesale level are not easing as quickly as some investors had hoped.
On a monthly basis, the January gain followed increases of 0.4% in December and 0.2% in November, indicating a gradual reacceleration in price growth. Meanwhile, personal consumption rose 0.4%, pointing to resilient demand conditions that may be contributing to pricing power across parts of the economy.
Services Drive the Upside
The bulk of January’s increase was driven by services, which climbed 0.8% – the largest advance since July 2025. A sharp 2.5% jump in trade service margins accounted for a significant portion of the move, reflecting higher markups received by wholesalers and retailers.
Transportation and warehousing services rose 1.0%, while services excluding trade, transportation, and warehousing were flat. Notably, margins for professional and commercial equipment wholesaling surged 14.4%, contributing more than one-fifth of the overall services increase.
Other areas posting gains included apparel and accessories retailing, chemicals wholesaling, telecommunications access services, and health and beauty retail. In contrast, system software publishing prices dropped 12.2%, and declines were also recorded in guestroom rentals and apparel wholesaling.
Goods Prices Fall, But Core Goods Firm
While services inflation accelerated, goods prices declined 0.3% in January – the largest drop since March 2025. The decrease was led by a 2.7% fall in energy prices and a 1.5% decline in food prices.
Gasoline alone accounted for nearly 80% of the goods decline, with prices falling 5.5%. Additional downward pressure came from chicken eggs, electric power, gas fuels, fresh fruits, melons, and ethanol.
However, core goods – excluding food and energy – rose 0.7%, signaling that underlying goods inflation remains present beneath the headline drop. Prices for search, detection, navigation, and guidance systems jumped 15.5%, while nonferrous metals and pork also increased.
Core PPI Extends Its Streak
The index for final demand less foods, energy, and trade services rose 0.3% in January, marking its ninth consecutive monthly increase. On a 12-month basis, this core measure advanced 3.4%, highlighting persistent underlying price pressures despite volatility in energy and food.
Market Implications
The stronger-than-anticipated PPI print could complicate the Federal Reserve’s policy outlook. With producer prices rising faster than forecast and personal consumption remaining firm, the data may dampen expectations for near-term rate cuts. Despite this situation, experts still predict more rate cuts in 2026.
Investors will now turn their attention to upcoming consumer inflation data to assess whether wholesale price pressures are feeding through to households. If similar strength appears in CPI readings, market volatility around rate expectations could intensify.
At the time of writing major U.S. stock indices are declining, treasuries are showing a notable surge.
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