US consumer prices increase strongly in January
US producer prices accelerated in January; The cost of goods outside the volatile food and energy category rose by the most in more than three-and-a-half years as businesses imposed import tariffs and raised prices at the start of 2026.
The stronger-than-expected increase in the Producer Price Index announced by the Ministry of Labor on Friday strengthened economists’ expectations that the Fed will not continue to cut interest rates before the June 16-17 meeting.
The Producer Price Index rose as margins expanded, including professional and commercial equipment wholesalers, as well as apparel, footwear and accessories retailing.
Some components, such as domestic airfares and health care, included in the calculation of Personal Consumption Expenditures price indexes, measures of inflation that the U.S. central bank tracks for its 2.0 percent target, rose strongly last month.
Economists estimate that core Personal Consumption Expenditure inflation, excluding food and energy, rose about 0.5 percent on a monthly basis in January after rounding up.
This measure increased by 0.4 percent in December, the largest increase in the last 10 months.
“Wider margins for manufacturers could lead to some increase in consumer costs in the coming months as firms incur higher costs for service,” said Ben Ayers, senior economist at Nationwide.
“Given still-buoyant core inflation and recent employment gains, we expect the Fed to maintain the pause at its next March meeting.”
Final demand PPI rose 0.5 percent last month, following a downwardly revised 0.4 percent advance in December, the Department of Labor’s Bureau of Labor Statistics said.
Economists polled by Reuters had forecast the PPI to increase by 0.3 percent, following the 0.5 percent increase previously reported in December.
In the 12 months to January, PPI increased by 2.9 percent, following a 3.0 percent increase in December.
The slowdown in the annual producer inflation rate reflects the removal from the calculation of last year’s high values.
Core PPI increased by 0.8 percent last month after rising 0.6 percent in December. Core producer inflation increased by 3.6 percent on an annual basis.
The report was delayed by a brief federal government shutdown that ended earlier this month.
Prices for services increased by 0.8 percent in January; This reflects a 2.5 percent increase in trade services, which measures changes in margins achieved by wholesalers and retailers.
Margins in professional and commercial equipment wholesaling increased 14.4 percent; This showed that businesses were introducing tariffs.
Prices also increased in wholesale of chemicals and related products, wireline telecommunications access services, health, beauty and optical retailing, and food and alcohol retailing.
Prices for transportation and warehousing services increased by 1.0 percent, but the cost of services, excluding trade, transportation and warehousing, remained unchanged.
“The issue last month seemed to be about tariffs,” said Paul Ashworth, chief North American economist at Capital Economics.
“Excluding trade and transportation, prices for other essential services remained unchanged.”
The Producer Price Index report contributed to the stock market crash on Wall Street. The dollar lost value against a basket of currencies.
U.S. Treasury yields mostly fell.
The U.S. Supreme Court last Friday struck down sweeping tariffs pursued by President Donald Trump under a law intended to be used during national emergencies.
But Trump quickly imposed a 10 percent global tariff for 150 days to replace some of the emergency tariffs, then announced it would rise to 15 percent.
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