U.S. PPI Shows Inflation Cooling, But Trade Policies May Disrupt Progress

Wholesale inflation in the U.S. showed signs of easing in December, offering a glimmer of hope that price pressures may not be accelerating as feared.

The Producer Price Index (PPI), which tracks changes in prices paid to producers, edged up by just 0.2% for the month and 3.3% year-over-year, falling slightly below economists’ expectations.

Energy costs were the primary factor behind the monthly increase, with wholesale energy prices jumping 3.5%. This rise offset otherwise stable pricing trends, as core PPI—excluding the more volatile food and energy categories—remained unchanged from November and held steady at 3.5% annually.

Economist Chris Rupkey of FwdBonds cautioned against celebrating too soon, warning that potential trade policies under President-elect Donald Trump could disrupt inflation trends. Proposed tariffs on key trading partners could lead to higher import costs, ultimately affecting consumer prices. Rupkey suggested that future inflation would largely depend on how these policies unfold, describing the current data as “a small victory” in a larger, uncertain battle.

While December’s inflation figures marked a slowdown compared to November’s 0.4% monthly rise, which was partly driven by soaring egg prices, they still represent the highest annual increase in PPI since February 2023. The slightly cooler-than-expected numbers bring temporary relief, but with economic uncertainty looming, analysts remain cautious about what lies ahead for inflation trends.