We expect that the final demand producer price index (PPI) rose 0.5% in January, with broadly firm increases across components of the index. Specifically, we look for another strong monthly gain in energy prices, having risen 2.2% last month as natural gas prices spiked while gasoline and liquefied petroleum gas also posted strong gains. Food prices also are expected to have firmed 0.5% on the month. If these increases are realized, final demand PPI will have advanced 3.4% over the past year, which would be the strongest annual pace since early 2023. Since bottoming out in the middle of that year, the annual growth rate of PPI prices has been trending higher, albeit in a somewhat choppy manner. The threat of tariffs on a range of imported intermediate goods points to upside risks to PPI price growth in coming months, with 10% additional tariffs on goods from China already in place.

We also anticipate a relatively firm core PPI price increase for January, having increased 0.3%. That would mark the strongest monthly increase in four months. After fairly soft readings in December, we see January data having come in universally strong across components of the core PPI. Specifically, we look for core goods to have risen 0.2% in January, while core services gained 0.4%. Construction prices, which have tended to be strong at the start of a year, are forecast to have risen 0.6% in January.