U.S. wholesale inflation stayed strong in January, according to new data from the Labor Department that ran hotter than many economists expected. The producer price index, which measures inflation before it reaches consumers, rose 0.5% from December and 2.9% from January 2025, the department said.
Economists surveyed by FactSet had forecast producer prices would increase 0.3% from December and rise 1.6% year over year. The report also showed that “core” wholesale prices—excluding food and energy—rose 0.8% from December and 3.6% from January 2025, with the year-over-year core increase described as the biggest since March of last year.
The Labor Department said the pickup was driven in part by services, with higher wholesale prices linked to increased profit margins for retailers and wholesalers. The same services-driven pattern raised the question of how much of the pressure reflects firms passing costs from President Donald Trump’s tariffs through to customers, a dynamic several analysts said they were watching.
Bankrate Senior Economic Analyst Mark Hamrick said the “outlook for inflation in the near term is that it likely will remain elevated.” In a separate commentary, Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, wrote that while retailers’ tariff bill has come down marginally over the past few months, retailers and wholesalers continued to lift their selling prices.
The report also pointed to increases in core goods. Core goods prices climbed 0.7% from December and 4.2% from January 2025, reflecting large moves in categories including cosmetics, pet food, some metals and metal-cutting machinery, the Labor Department said.
In contrast, energy prices fell, with gasoline dropping 5.5% from December and 15.7% from a year earlier. Wholesale food prices also fell, helping temper parts of the overall index even as services and other categories remained elevated.
The producer price report comes about two weeks after the Labor Department said consumer prices rose 2.4% from a year earlier in the prior month, nearing the Federal Reserve’s 2% target as measured by year-over-year consumer inflation. Economists had worried that Trump’s higher import taxes could push inflation higher, and the producer data suggested any tariff-driven impact so far has been more modest than feared—though still leaving inflation above what the Fed wants.
Wholesale prices matter for monetary policy because they can provide an early look at where consumer inflation may be headed. The report also noted that some producer-price components, including measures tied to health care and financial services, feed into the Fed’s preferred inflation gauge, the personal consumption expenditures, or PCE, price index.
In December, PCE inflation rose faster than economists had forecast, climbing 2.9% from a year earlier—its biggest such increase since March 2024, according to the report. The Federal Reserve cut its benchmark rate three times last year to support a sluggish job market, and it has been reluctant to cut further without clearer evidence that inflation is cooling. After Friday’s producer-price release, economist Ben Ayers of Nationwide said, “we expect the Fed to remain on pause during its upcoming March meeting.”