Yesterday’s Consumer Price Index (CPI) showed a mix of results, but all attention is now on the Producer Prices report to gauge whether inflation is on the rise. The latest data indicates that inflation is not heating up as expected, with both headline and core Producer Price Index (PPI) coming in cooler than anticipated.
The headline PPI increased by 2.3% year-over-year, a decrease from the previous month and below expectations. This marks the lowest annual increase since September 2024. On a month-over-month basis, the PPI remained unchanged, falling short of the projected 0.2% increase.
Services PPI showed a decline on a monthly basis, while energy prices continued to deflate year-over-year. Final demand goods saw a 0.3% rise in prices, driven by increases in communication equipment and energy products. Final demand services, on the other hand, experienced a slight decrease, with declines in traveler accommodation services offsetting gains in portfolio management.
Core PPI also fell short of expectations, coming in at 2.6% year-over-year. The report suggests that the pipeline for PPI is beginning to show signs of pickup, particularly in Intermediate Demand Goods prices. Despite concerns about tariff-related inflation, margin pressures eased in the latest data.
The question remains whether energy prices will start to rise in the coming months. The data indicates that inflationary pressures are currently subdued, but future reports will provide further clarity on the situation.