January Producer Price Rise Suggests More Inflation Brewing
By Reuters | 27 Feb, 2026

Prices of equipment, apparel, footwear, chemicals and a broad range of other goods largely sourced from overseas rose more than expected as more tariff costs are now being passed on.

U.S. producer prices increased more than expected in January, likely as businesses passed on higher costs from import tariffs, suggesting inflation could pick up in the months ahead. 

The Producer Price Index for final demand rose 0.5% last month after advancing by a downwardly revised 0.4% in December, the Labor Department's Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast the PPI gaining 0.3% after a previously reported 0.5% increase in December. 

A 0.8% jump in services accounted for the rise in the PPI. That reflected a 2.5% increase in trade services, which measure changes in margins received by wholesalers and retailers. There was a 14.4% surge in margins for professional and commercial equipment wholesaling, suggesting businesses were passing on tariffs.

Prices also increased for apparel, footwear and accessories retailing, as well as chemicals and allied products wholesaling, bundled wired telecommunications access services, health, beauty and optical goods retailing, and food and alcohol retailing.

In the 12 months through January, the PPI increased 2.9% after rising 3.0% in December. The moderation in the year-on-year producer inflation rate reflected last year's high readings dropping out of the calculation. 

The report was delayed by the brief shutdown of the federal government early this month. Producer goods prices fell 0.3%, with the cost of energy declining 2.7% and food decreasing 1.5%. Excluding food and energy, goods prices soared 0.7%.

Some of the components in the PPI report go into the calculation of the Personal Consumption Expenditures (PCE) Price Indexes, the inflation measures tracked by the Federal Reserve for its 2% target. 

Prior to the PPI data, economists estimated that core PCE inflation increased by as much as 0.5% in January, which would translate to a year-on-year advance of 3.1%. 

Core PCE inflation rose 0.4% in December and increased 3.0% year-on-year. The government will publish the delayed PCE inflation report on March 13.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)