Wholesale prices increase driven by service costs

The tariff bill might finally be due—at least for producers.

The Producer Price Index, which measures wholesale inflation, jumped 0.5% in December, according to the most recent report from the Bureau of Labor Statistics. This is more than double what was predicted, according to a Reuters survey of economists that forecast a 0.2% PPI hike.

This is a signal that business might be passing on tariff costs down the supply chain. A few weeks ago, the consumer price index increased a little less than some macroeconomists expected.

The increase in the PPI was driven mostly by a 0.7% spike in services costs. Service costs increased in large part because of higher machinery and equipment wholesale prices. Goods prices were flat compared to November.

The core goods category that excludes volatile energy and food costs also rose higher than expected. Economists expected a 2.9% increase year over year for core goods inflation for December, but the actual number topped 3.3%.

With this report, the BLS is caught up after the record-breaking 43 day government shutdown in October and November 2025.

Looking back on the past 12 months, the PPI has increased 3%, matching November and defying hopes for cooling inflation numbers. At the Federal Reserve meeting on Wednesday, Fed Chair Jermone Powell acknowledged tariffs are putting upward pressure on inflation, but added that he thinks it will ease off in the middle quarters.

Fingers crossed.