Wholesale inflation accelerated in February, marking a surprise uptick in producer prices that may encourage policymakers to hold interest rates higher for longer.
The Producer Price Index (PPI), which measures inflation at the wholesale level before reaching the consumer, rose 0.6% in February and 1.6% year over year, the U.S. Bureau of Labor Statistics reported Thursday.
According to the Labor Department, goods prices in the U.S. rose 1.2% in February, marking the most significant increase since August 2023. February’s increase was primarily driven by a 4.4% rise in energy costs and a 1% increase in food prices.
On the other hand, services prices rose 0.3% in February after increasing 0.5% in January. The monthly price change was due to a 0.9% rise in transportation and warehousing services and a 0.3% decline in trade services.
“The February PPI report was a mixed bag,” wrote Gus Faucher, chief economist for PNC Financial Services, in a research note.
Although inflationary pressures remain in the pipeline, Faucher suggests that supply and demand have mostly normalized since the pandemic, which has caused inflation to “gradually slow.”
Still, Thursday’s hotter-than-expected report for wholesalers comes days after the Labor Department released data showing that consumer prices are also rising.
As reported by The Dallas Express, topline inflation rose 0.4% month over month in February and 3.2% over the last 12 months. Meanwhile, the Labor Department reports that Core CPI, which removes the volatile food and energy components, jumped 0.4% in February and 3.8% year over year.
With wholesalers and consumers both seeing an uptick in prices in February, the Fed is unlikely to have enough confidence to start lowering interest rates.
