Surge in December US Producer Prices Augurs Higher Inflation
By Reuters | 30 Jan, 2026

A somewhat startling 0.5% PPI surge for final demand suggests tariff costs are now starting to be passed through to consumers.

U.S. producer prices increased more than expected in December, with businesses appearing to pass on higher costs from import tariffs, suggesting inflation could pick up in the months ahead.

The Producer Price Index for final demand surged 0.5% last month after an unrevised 0.2% gain in November, the Labor Department's Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast the PPI climbing 0.2%.

In the 12 months through December, the PPI increased 3.0% after rising by the same margin in November. 

The BLS is now caught up on the PPI and Consumer Price Index releases that were delayed by the 43-day shutdown of the federal government. U.S. Senate Republicans and Democrats were on Friday racing to avoid another shutdown at midnight, which would delay data releases from the BLS, including January's employment report due next Friday. 

Last month's larger-than-expected rise in producer prices was lead by a 0.7% increase in services. A 1.7% jump in margins for final demand trade services, which measures changes in margins received by wholesalers and retailers, accounted for two-thirds of the increase in services. 

Businesses had been absorbing some of President Donald Trump's sweeping import tariffs, preventing a sharp increase in inflation. The Federal Reserve on Wednesday left its benchmark overnight interest rate in the 3.50%-3.75% range. Fed Chair Jerome Powell attributed the overshoot in inflation to tariffs, adding "but there's an expectation that sometime in the middle quarters of the year we'll see tariff inflation topping out."

Producer goods prices were unchanged in December. 

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)