U.S. PPI Jumps to 3.0% in December, Smashing Expectations

Inflation's factory floor just got louder.

Producer prices heat up

Forget whispers of cooling—the latest Producer Price Index reading shouts otherwise. December's figure didn't just inch higher; it leaped, landing a full percentage point above what most analysts had penciled in. That 3.0% print signals persistent cost pressures bubbling up the supply chain, long before they hit store shelves.

The Fed's next move

This data throws a wrench into the 'mission accomplished' narrative on inflation. Central bankers watching input costs surge now face a tougher calculus. Talk of imminent rate cuts gets quieter, replaced by renewed scrutiny of every upcoming economic report. The pivot party might be on hold.

Markets on watch

For traders, it's a classic 'good news is bad news' setup. Robust economic data? That just means the monetary policy punchbowl stays locked away longer. Expect volatility as the street recalibrates timelines—because on Wall Street, the only thing loved more than rising profits is cheap money, and one just made the other less likely.

So much for transitory. The inflation beast isn't just back; it never really left the building. Just ask any producer paying the bills.

Services drive producer prices higher

Final demand services posted their largest gain since July, when prices had climbed 0.9%. In December, two-thirds of the increase came from a 1.7% surge in trade service margins, which track what wholesalers and retailers earn.

Prices excluding trade, transportation, and warehousing increased 0.3%, while transportation and warehousing alone rose 0.5%.

More than 40% of the monthly services rise was tied to machinery and equipment wholesaling margins, which jumped 4.5%. Other areas that moved higher included guestroom rental, food and alcohol retailing, health and beauty retail, optical goods, portfolio management, and airline passenger services.

On the downside, bundled wired telecom services fell 4.4%. Automotive fuel retailing and long-distance motor carrying also declined.

Final demand goods were flat after a 0.8% increase in November. Prices excluding food and energy rose 0.4%, offset by a 1.4% drop in energy prices and a 0.3% decline in food prices. Nonferrous metals rose 4.5%, while residential natural gas, motor vehicles, soft drinks, and aircraft equipment moved higher. Diesel fuel plunged 14.6%. Gasoline, jet fuel, beef, veal, and iron and steel scrap all fell.

Over the full year, headline producer inflation reached 3.0%, while the Core measure finished at 3.5%, according to revised data from August through November.

Intermediate demand prices climb across supply stages

Intermediate demand showed uneven moves. Processed goods slipped 0.1%, unprocessed goods jumped 2.3%, and services advanced 0.7%. Processed energy goods dropped 2.4%, while processed food prices fell 1.3%.

Materials excluding food and energy rose 0.7%. Diesel fuel again led declines, down 14.6%, alongside jet fuel and gasoline. Nonferrous mill shapes rose 2.6%, while utility natural gas, electric power, and synthetic plasticizers increased.

Unprocessed goods recorded their largest gain since January, driven by energy materials up 5.5%. Natural gas jumped 34.8%. Raw milk, metal ores, scrap, and livestock prices rose. Slaughter hogs fell 10.1%, while crude petroleum and carbon steel scrap declined. Despite December’s rise, unprocessed goods prices fell 0.3% in 2025 after climbing in 2024.

By production stage, stage 4 prices rose 0.6%, stage 3 increased 0.2%, stage 2 surged 1.4%, and stage 1 advanced 0.5%. Services pushed most gains, while diesel fuel continued to drag.

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