Wholesale prices rose lower than expected in December, calming some fears that a US inflation resurgence is on the horizon.
“Higher-than-expected PPI in December are going to be positive for the markets, which have been concerned with higher inflation readings throughout the last several months,” Eugenio Aleman, chief economist at Raymond James, wrote in response to the report.
When excluding volatile food and energy categories, the index showed no increase in producer prices last month — an indication of some relief ahead of Wednesday’s critical consumer inflation report.
“The weakness was broad-based across most components aside from energy, where we saw a noticeable increase in gasoline prices last month and a few strength in airline pricing,” noted Charlie Ripley, senior investment strategist for Allianz Investment Management.
Energy prices increased by 3.5% on November levels, the most important monthly increase since February of 2024. Domestic and international airline prices, meanwhile, edged up by 7.2% month over month. Airlines feed directly into the Fed’s preferred core PCE inflation gauge, set for release later this month.
“We expect a wider range of outcomes following tomorrow’s release on the most recent consumer price data,” Ripley said.
Consumer prices for December are expected to stay sticky, with core CPI expected to have risen 3.3% on an annual basis for the fifth straight month. Tariff uncertainty stays a key query for the remaining of the 12 months.
“The proposed increase in tariffs by the incoming administration is adding to inflation concerns,” said Seema Shah, chief global strategist at Principal Asset Management.
“Estimates range from a one-off 0.5% to 1.5% increase in inflation from increased tariffs alone. After all, central banks typically leaf through one-off increases from tariffs — unless it results in an increase in inflation expectations. Notably, because the election, each market-based and survey-based measures of one- and two-year inflation expectations have risen barely.”
Subsequently, “the Fed cannot ignore the upside inflation risks facing the US economy,” in Shah’s view.
“Recent economic strength has combined with a rising threat of tariffs to extend upside inflation risks.”