US wholesale inflation substantially slowed in February
By Alicia Wallace, CNN
(CNN) — Americans just got some reassurances that inflation was slowing, and not reaccelerating, last month.
The Producer Price Index, a wholesale inflation gauge that is being closely watched for tariff-related impacts, showed that price hikes slowed substantially in February.
The PPI index was unchanged from January, and rose 3.2% for the 12 months ended in February, according to Bureau of Labor Statistics data released Thursday. That marked a sharp slowdown from January, when prices rose 0.6% and 3.7% for those respective periods.
Economists were expecting wholesale-level inflation to cool amid falling energy prices, and that was the case: Energy prices fell 1.2% for the month.
Excluding food and energy, categories that tend to be volatile, core PPI fell 0.1% from January (when it sharply rose 0.6%), bringing the annual increase to 3.4%, down from a 3.8% rate the month before.
“After hotter readings in December and January, flat producer prices for February should provide some assurances that inflation isn’t taking off again,” Ben Ayers, senior economist at Nationwide, wrote in commentary issued Thursday. “But one month does not make a trend, and the upward pressure for goods costs (even excluding the outsized increase for eggs) is a warning sign that imposed tariffs could drive prices higher in coming months.”
The latest Consumer Price Index, released Wednesday, showed annual inflation slowed for the first time in five months.
PPI, which measures the average change in prices paid to producers of goods and services, serves as a potential bellwether for retail-level inflation in the months ahead. This index also is being scrutinized to glean insight as to the initial impacts of President Donald Trump’s sweeping new and proposed tariffs.
Wholesale goods prices rose 0.3% for the month, an increase that was fueled largely by sharp inflation in eggs but offset by falling energy prices. Egg inflation is slowing on the wholesale level, but prices remain significantly higher than last year as a deadly avian flu has devastated flocks and impacted supply.
The eggs for fresh use index rose 28.1% on a monthly basis, slowing from 44% in January. On an annual basis, the category is up 136.6%.
Excluding food and energy, final demand goods rose 0.4%.
“The fastest increase since January 2023, presumably as tariff effects began to flow into input costs for producers,” Ayers noted. “With tariffs on steel, aluminum and some products from Mexico and Canada enacted in March, the goods category could jump higher soon.”
Increases in wholesale good prices could reflect not just the direct impact from tariffs but also producers raising prices in anticipation of “trade war fallout,” said Elizabeth Renter, NerdWallet’s senior economist.
“Businesses, like consumers, don’t necessarily wait for direct impact before taking action,” she wrote Thursday. “For example, if you’re fairly confident prices on televisions are going to rise in coming months, you might upgrade now rather than wait. Likewise, businesses may increase inventories and wholesalers may raise prices, all in an effort to beat the real changes to the punch.”
She added: “In this way, tariffs and other inflationary policies can shape the economy before they’re even implemented.”
Thursday’s PPI, like CPI before it, is another data series reflecting “the calm before the storm,” Joe Brusuelas, principal and chief economist at RSM US, told CNN in an interview.
“We know that it’s going to be passed through,” he said of higher tariffs paid by US importers. “We know it’s going to show up, but it’s going to be a multi-month phenomenon, and February was not the month that it was going to happen.”
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