Wholesale prices rise sharply, pointing to persistent inflation - but there's some good news

By Jeffry Bartash

PPI also contains hints of easing price pressures

Rising wholesale prices suggest that U.S. inflation is a drag on the economy.

The cost of wholesale goods and services rose at an accelerated pace in January for the second month in a row, suggesting persistent inflation could dog the economy at least through the early part of the new year.

Producer prices rose 0.5% in January, according to an index published by the government. It was the biggest increase in four months and topped the 0.3% Wall Street forecast.

The 12-month increase in wholesale prices - where inflation tends to show up first -eased slightly to 2.9% from 3.0% in the prior month.

The current level of wholesale inflation suggests annual inflation will stay above the Federal Reserve's 2% target through the early part of the year.

The PPI report was delayed a few weeks due to recent lapses in federal funding.

Key details: There was some good news in the latest PPI report. So-called core wholesale prices rose a lesser 0.3% in January to take some sting out of the headline increase.

The 12-month increase in core prices also moved down to 3.4% from 3.5%.

The core rate strips out volatile food, energy and trade-related costs and gives a more accurate view of inflation trends.

The wholesale cost of goods, meanwhile, fell in January for the third time in five months - another good sign. Goods prices are far more affected by tariffs than service prices.

The cost of services jumped almost 1% to mark the biggest uptick since last summer, but most of the increase was tied to a volatile category known as trade margins, which is not a reliable measure of prices.

In other good news, the cost of partly finished goods was flat in January and prices of raw materials declined, suggesting inflation might be easing in the bowels of the economy.

Wholesale prices reflect the costs companies pay for supplies or for products they intend to sell directly to consumers. When these prices change, it usually influences the rate of inflation.

Big picture: Inflation is rising more slowly now than it was a few years ago, but it's still running above prepandemic trends and frustrating everybody.

The Fed is aiming to lower annual inflation to 2%, and hopes to get closer to its goal by midyear. That means it is unlikely to cut interest rates again until the late spring or summer - and only if inflation actually slows further.

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to open sharply lower in Friday trading.

-Jeffry Bartash

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02-27-26 0900ET