The 0.5% m/m increase in final demand PPI in January is another illustration that elevated price inflation remains a threat. Excluding food and energy prices, which were pulled down by a 5.5% m/m decline in gasoline, core PPI increased by an alarming 0.8% m/m, with the annual core PPI inflation rate accelerating back to 3.6%, from 3.3%. Admittedly, the increase in the core rate owed a lot to another jump in trade services margins but, even excluding the latter, core PPI increased by 0.3% m/m and is up 3.4% over the past 12 months. The problem last month appeared to be tariff-related, with core goods PPI up 0.7% m/m while, if we exclude trade and transportation, other core services prices were unchanged.
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