A closely watched inflation indicator ticked up unexpectedly in December, stoking concerns that consumers and the U.S. economy continue to face challenges from rising prices.
The Producer Price Index, which measures changes in U.S. wholesale prices paid by businesses, increased by 0.5% in December, according to data released Friday by the U.S. Bureau of Labor Statistics.
December’s data marks the index’s highest rate in the last three months. The jump can be largely attributed to a 0.7% rise in service prices, the BLS said, noting this is its largest increase since July.
The bureau said the majority of the jump in service prices is from trade services, with over 40% from a “rise in margins for machinery and equipment wholesaling.”
Producer prices were led higher by a 0.7% jump in the cost of services from the month before. Overall, service prices have jumped 3.2% from this time last year. Friday’s data “suggests businesses have been able to pass along some of the costs from tariffs as higher prices,” JPMorgan said in an analyst note.
Prices for goods were unchanged in December, primarily due to declines in food and energy prices, with a 14.6% decrease in diesel fuel prices. When those sectors were removed, prices for goods rose 0.4% for the final month of last year.
“Aside from food and energy prices, the final demand core goods PPI rose 0.4% in December, which is on the firm side of readings over the past few years and points to some continued pass-through of tariffs into goods prices,” JPMorgan said in a note. “On an over-year-ago basis, core final demand PPI goods rose 3.7%, which points to ongoing pipeline pressures for consumer inflation that appears to be bolstered in part by tariffs.”
When prices for food, energy and trade services were removed, prices rose by 0.4% for the eighth month in a row.
Overall, prices jumped 3% from December 2024.
Kevin Hassett, the director of the National Economic Council, said in an appearance on CNBC that while the producer index was elevated, the Consumer Price Index — the inflation that tracks the prices people pay — was lower.
“The PPI number is a little bit different right now than what we’re seeing from the CPI,” Hassett said Friday. “The CPI over the last three months, the annual rate, was lower than 2. I think that right now we’re seeing materials prices like gold and so on are up quite a bit, in part because of all the investment that’s happening for artificial intelligence and data centers and so on.”
Consumer inflation overall hit 2.7% in December on a yearly basis, notably due to a spike in food costs.
Consumers have already been battling high inflation coupled with a stagnant labor market, and the BLS’ latest data shows that prices likely aren’t edging down anytime soon.
President Donald Trump has touted an “economic boom” while at the same time making calls to address affordability concerns. In recent weeks, the president has called for a cap on credit card interest rates and made a push to lower mortgage costs.
At the same time, Trump has continued his crusade to get the Federal Reserve to lower interest rates, a move that many economists say risks boosting inflation.
However, the Federal Reserve didn’t budge under continued pressure from the president and instead decided to hold interest rates on Wednesday.
“With inflation continuing to run meaningfully above target and some uncertainty about how tariffs will impact the path for consumer prices this year, we expect policy to remain on hold for a time,” JPMorgan said.
