U.S. Wholesale Inflation Accelerates in December, Fueled by Surging Service Costs

WASHINGTON — U.S. wholesale inflation re-accelerated at the end of last year, driven primarily by a sharp increase in service-sector costs, according to government data released Friday. The Producer Price Index (PPI), which tracks prices received by domestic producers, climbed 0.5% in December from the prior month—surpassing economist expectations of a 0.3% gain and marking the fastest monthly rise since September.

The Labor Department report, delayed for over two weeks due to last fall's federal government shutdown, showed the year-over-year increase held steady at 3.0%. The monthly surge was largely attributed to a 0.7% jump in services prices, the most significant increase since July, reflecting expanded profit margins for wholesalers and retailers. In contrast, goods prices were flat for the month, though up 2.5% from December 2024.

This data provides an early signal of potential consumer inflation trends. Key components of the PPI, including healthcare and financial services, feed directly into the Federal Reserve's preferred inflation measure, the Personal Consumption Expenditures (PCE) price index. The latest figures arrive as the Fed, which held its benchmark rate steady this week, continues its long-running battle to return inflation to its 2% target. While the impact of recent trade policies on prices has been more muted than some analysts feared, the December PPI suggests underlying cost pressures, particularly in services, remain stubborn.

"The headline number is concerning, but the real story is the ongoing momentum in services," said Michael Torres, a senior economist at the Hamilton Institute. "This isn't about supply chains or energy anymore; it's about domestic wage pressures and pricing power in sectors like trade and transportation. It suggests the 'last mile' back to the Fed's target could be bumpier than markets hope."

Lisa Chen, a portfolio manager at Clearwater Capital, offered a more measured take: "The goods side is clearly cooling, which is a positive. One hot month in services doesn't make a trend, and the annual rate is stable. The Fed will look at this alongside the softer CPI data we saw last week. I doubt it changes their near-term patience."

However, the report drew a sharper reaction from David R. Miller, an outspoken commentator and author of 'The Inflation Trap'. "This is what policy failure looks like," Miller stated. "The Fed is asleep at the wheel, celebrating premature victories while core inflationary fires keep burning in the services sector. A 0.5% monthly jump annualizes to a 6% rate—that's not 'modest,' that's a crisis for working families being ignored."

The consumer price index report for December, released earlier this month, showed a slight easing of price pressures for end consumers, thanks largely to falling gasoline and used car costs. The divergence between wholesale and consumer trends will be a key focus for policymakers in the months ahead.