US wholesale inflation heated up more than expected in January, new data showed Friday.
The Producer Price Index, which measures the average change in prices seen by producers and manufacturers, rose 0.5% last month, a pickup from December’s 0.4% rate, according to the latest data from the Bureau of Labor Statistics. The annual rate of inflation nudged down to 2.9% from 3%.
Gas and food prices tumbled during the month; however, those decreases were countered by a sharp increase in “trade services,” a category that measures profit margins for wholesalers and retailers.
Trade services can be highly volatile on a monthly basis and economists have closely watched this category during the past year as it could serve as a signal for whether businesses are absorbing the higher costs US importers are paying for tariffs.
Trade services leapt 2.5% in January, a potential indication that costs could be passed along to other businesses and consumers.
Economists were expecting wholesale inflation to increase 0.3%, which would have resulted in a 2.6% annual rate.
When excluding food and energy, the core PPI gauge (which provides a measure of the underlying inflation trend) picked up sharply. Prices rose 0.8% versus 0.6% in December to bring the annual rate to 3.6%, the highest in 10 months.
This story is developing and will be updated.