Washington: Wholesale inflation in the United States accelerated in December, driven principally by rising costs in the service sector, underscoring persistent inflationary pressures in the production pipeline as the new year begins.
In December 2025, the Producer Price Index (PPI) for final demand rose 0.5% on a seasonally adjusted basis, surpassing economists’ expectations of a more modest gain and marking the largest monthly increase in three months. Over the 12 months ending in December, producer prices climbed 3.0%, holding steady with November’s year-on-year pace.
A detailed breakdown reveals that the uptick was primarily driven by rising services costs, with the index for final demand services climbing 0.7% the strongest advancement since July. Much of this increase was linked to higher profit margins among wholesalers and retailers, particularly in trade services, which surged 1.7% in December.
Within the services category, multiple segments contributed to the rise, including machinery and equipment wholesaling, guestroom rental, and retailing of food and alcohol, while a few categories such as bundled telecommunications access saw price declines.
By contrast, prices for final demand goods were essentially flat in December after a period of more noticeable gains earlier in the year. Within goods, increases in items like nonferrous metals and residential natural gas were offset by significant declines in diesel fuel and other energy products.
Economists have been closely watching how recent U.S. import tariffs are influencing inflation. Although many tariff-induced costs had been absorbed by businesses until now, some of these expenses appear to be filtering into producer prices, particularly in sectors with thin margins.
The latest PPI data were released after a delay caused by a 43-day federal government shutdown last year, which postponed several key economic reports. Despite this catch-up, concerns about future shutdowns still linger, raising the possibility of additional reporting delays.
The Federal Reserve continues to monitor producer prices as an indicator of inflationary trends that could ultimately influence consumer prices. In its most recent meeting, the Fed opted to hold its benchmark interest rate at 3.50%–3.75%, with Chairman Jerome Powell acknowledging tariff pressures but suggesting their impact may ease later in the year.
Persistent wholesale price inflation especially in services could complicate the central bank’s task of returning inflation to its 2% long-term target, particularly if companies increasingly pass higher input costs on to consumers.
Producer prices are often viewed as a leading indicator for consumer inflation, as higher costs at the wholesale level can eventually translate into greater prices for households. The December acceleration, particularly in services, suggests that inflationary forces within the U.S. economy remain active even as broader price gains show signs of moderation.
As businesses, policymakers, and financial markets digest these figures, attention now shifts to upcoming consumer price index (CPI) data and the Fed’s future policy moves for clues about the broader inflation trajectory heading into 2026.