Producer Prices Climb on Costly Services as Goods Soften, Keeping Inflation Pressures Alive
The Producer Price Index (PPI) for final demand, which tracks what businesses receive for goods and services, increased 0.5 percent in January from December, after gains of 0.4 percent in December and 0.2 percent in November. Over the past 12 months, producer prices rose 2.9 percent.
A closely watched “core” gauge that strips out food, energy and trade services climbed 0.3 percent in January, marking its ninth straight monthly increase. That core index was up 3.4 percent from a year earlier, underscoring persistent underlying price pressures even as volatile components swing.
The January rise in wholesale prices was driven almost entirely by services. Prices for final demand services increased 0.8 percent, the largest monthly gain since July 2025, while prices for final demand goods fell 0.3 percent, the biggest drop since March 2025.
Within services, margins in trade, what wholesalers and retailers earn on the goods they sell, rose 2.5 percent. More than one-fifth of the overall services increase came from a 14.4 percent jump in margins for professional and commercial equipment wholesaling. Retail margins for apparel, footwear and accessories, as well as health, beauty and optical goods, also rose, along with prices for bundled wired telecommunications access services and food and alcohol retailing.
Not all service categories moved higher. Prices for system software publishing fell 12.2 percent, and indexes for guestroom rental and apparel wholesaling declined.
On the goods side, cheaper energy and food pulled the overall index down. Final demand energy prices dropped 2.7 percent, while food prices fell 1.5 percent. Excluding food and energy, prices for other final demand goods rose 0.7 percent.
Nearly 80 percent of the decline in goods prices came from gasoline, which fell 5.5 percent, but is now on the rise after the U.S.-Israel bombing in Iran. Prices also fell for chicken eggs, electric power, gas fuels, fresh fruits and melons, and ethanol, while prices jumped for search, detection, navigation and guidance systems and increased for nonferrous metals and pork.
Further back in the supply chain, prices sent mixed signals, with some input costs easing while others continued to climb. Prices for processed intermediate goods were unchanged in January as higher costs for core materials were offset by cheaper energy and food inputs. Unprocessed intermediate goods, including many raw commodities, declined on the month and posted their steepest 12-month drop since late 2024. In contrast, prices for intermediate services and inputs used by industries closest to consumers kept rising, pointing to ongoing cost pressures further along the production pipeline.
