The close of last year brought a rise in wholesale inflation in the U.S., which could indicate that the inflation peak is still ahead, and consumer prices may rise faster.

Wholesale inflation in the United States picked up pace in November, partly due to a sharp rise in energy costs recorded after the government shutdown.

The latest Producer Price Index (PPI) release showed prices rising 0.2% from the previous month, yielding an annual rate of 3% according to the Bureau of Labor Statistics.

The data also note that wholesalers and retailers are likely bearing a large share of the costs associated with President Donald Trump’s broad tariff policy on imported goods.

“Retail trade protects consumers from further substantial price increases on goods caused by tariffs.”

– Samuel Tombs

Details of monthly fluctuations and their impact

The PPI can serve as a precursor to what consumers will see in the coming months, as it measures the average change in prices for goods and services received by producers.

Because the data were collected during the government shutdown, the Bureau of Labor Statistics did not publish a separate October report; however, the October data were included – the requests to update prices and to submit data were delayed.

In October, a drop in energy prices led to a softer reading: producer prices rose 0.1% from September, and the annual increase was 2.8%.

In September, the annual inflation rate was revised upward to 3% from 2.7%.

If you exclude food and energy, as well as trade services – which can also be volatile – core PPI rose 0.3% in October, and prices were virtually unchanged in November; however annual rates rose to 2.9% in October and 3.0% in November.

The latest report also highlights how companies are coping with higher costs through President Donald Trump’s broad tariff policy.

Trade services, which measure the profitability of wholesalers and retailers, fell 0.8% in October and November, which may indicate that businesses are partially absorbing higher costs rather than fully passing them on to consumers.

When excluding food, energy, and trade services – the main trajectory of wholesale inflation was even more troubling: prices rose 0.7% in October and 0.2% in November, lifting the annual pace to 3.4% in October and 3.5% in November.

This was the highest annual pace for the PPI excluding energy, food, and trade services in the last eight months.

“Early calls for tariff-related inflation to peak look less convincing after the data are parsed.”

– Joe Brusuelas

The latest PPI report also provides signals for the Fed’s preferred inflation gauge, since several PPI readings feed into the Consumer Price Index (PCE).

Data on the CPI for Q4 and the latest PPI data indicate that the PCE index is diverging from the Fed’s 2% target.

The PCE report for October and November, which will also include the latest spending data, is scheduled to be released on Thursday, January 22. The PPI report for December is scheduled for publication on January 30.