United States producer prices rose more than expected in January as tariffs weighed on services prices.
The producer price index (PPI) increased 0.5% during the month, per the U.S. Bureau of Labor Statistics (BLS). This is above both Dow Jones estimates of 0.3% and the 0.4% growth seen in December.
“The January increase in prices for final demand can be traced to a 0.8-percent advance in the index for final demand services. In contrast, prices for final demand goods declined 0.3 percent,” wrote the BLS.
The core PPI was up 0.8%, also passing estimates of 0.3% and December’s figure of 0.6%. Across the year, the headline PPI rose 2.9% and the core index grew 3.6%.
The increase in services prices was boosted by a 2.5% surge in trade services. Transportation and warehousing services also rose 1%.
Among goods, foods prices were down 1.5%, while energy prices dropped 2.7%.
“The problem last month appeared to be tariff-related," according to Capital Economics chief North America economist Paul Ashworth. "If we exclude trade and transportation, other core services prices were unchanged.”
The U.S. Supreme Court ruled in February that the blanket tariffs imposed under the International Economic Emergency Powers Act were unlawful. A new slate of 15% tariffs has now been added under a different statute, but these will expire after 150 days unless Congress votes to extend them.
January’s PPI increase also strengthens the likelihood that the Federal Reserve will not cut interest rates until at least June. Interest rate traders project a 95.6% chance that rates will be held steady at the Fed’s next meeting on 18 March, per CME FedWatch.
