US wholesale inflation substantially slowed in February
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.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Wall Street Journal
13 minutes ago
- Wall Street Journal
Trump Says He's Nearing a Possible Deal With Harvard
President Trump said his administration was 'working closely' with Harvard University and could announce a deal within the next week. The White House and Harvard have been locked in battle since late March. Trump has pulled billions in federal funds over antisemitism and DEI concerns, tried to block Harvard's ability to enroll international students and threatened its tax-exempt status. Harvard has sued the administration, saying the government has violated its First Amendment rights.
Politico
an hour ago
- Politico
‘We can't wait forever': GOP frustrated but unwilling to act on Trump's TikTok extension
President Donald Trump's latest move to keep TikTok alive is yet again frustrating congressional Republicans, many of whom object to China's continued involvement in the popular app but just want to be done with the whole drama. 'Not my favorite thing,' Sen. Josh Hawley (R-Mo.), along-time proponent of the ban, deadpanned, when asked about the president's plan to issue another extension. He spoke a day before the White House confirmed Trump signed a 90-day suspension of enforcement of the law requiring TikTok to divest from ByteDance, its China-based parent company, throwing another lifeline to the short-form video app. By Friday, some House lawmakers registered a note of resigned irritation. The extension — Trump's third since the law went into effect on Jan. 19 — is a unilateral decision not envisioned in the bipartisan law passed by Congress and upheld last year by the Supreme Court. Rep. Darin LaHood (R-Ill.), a member of the House Intelligence and China committees, told POLITICO. 'The national security concerns and vulnerabilities are still there, and they have not gone away. I would argue they've almost become more enhanced in many ways.' But Trump's extension of the TikTok law largely boxed out Republicans in both chambers who have shown little inclination — beyond stern words — to prevent him from making these postponements almost routine. Many GOP lawmakers saw themselves as granting the president space to cut a promised deal while the White House deals with urgent priorities, like trade negotiations and the Israel-Iran conflict. 'In light of everything going on, I think he did the right thing,' Sen. John Kennedy (R-La.), a China hawk who voted for the ban, told POLITICO of Trump. 'I have concerns about all kinds of things — that [the extension] is on the list — but it's not at the top of the list.' Though Trump has promised his TikTok negotiations areclosely tied to trade talks with China, Treasury Secretary Scott Bessent testified last week to a Senate panel that TikTok's sale was not currently a part of the negotiations with China, raising a further potential obstacle to Trump inking a deal in the near future. Sen. Lindsey Graham (R-S.C.), a close ally of the president and longtime national-security hawk said earlier in the week: 'The sooner we get that issue solved, the better,' without offering any ideas for further enforcement. 'I just want finality,' Senate Judiciary Chair Chuck Grassley (R-Iowa) told POLITICO. 'I want some certainty and just know that the Congress isn't being played when we make a decision [that the app] be sold.' Another member of the House China Committee, Rep. Zach Nunn (R-Iowa), told POLITICO, 'No more extensions. It's time to follow through.' Rep. Dan Newhouse (R-Wash.), also a member of the China panel, noted in a post on X Thursday the law only allows one extension of the compliance deadline, adding, 'I was proud to support the ban of TikTok and believe the law should be implemented as written.' With their comments, the lawmakers echoed House China Chair John Moolenaar (R-Mich.), who in early June called for the U.S. to 'let [TikTok] go dark' to bring China to the table to negotiate. He reiterated that stance on Friday. 'Delays only embolden the Chinese Communist Party,' Moolenaar said in a statement to POLITICO. 'I urge the administration to enforce the law as written and protect the American people from this growing national security threat.' Still, observers say Republicans are not exercising their leverage to demand the White House enforce the law they helped write, for example by withholding funding or congressional oversight hearings. 'I keep reading that Republicans are 'frustrated' and 'impatient' about their TikTok law being ignored, but they should stop complaining to reporters and take it up with Trump,' said Adam Kovacevich, founder and CEO of the pro-tech Chamber of Progress. Among the Republicans being undercut by the president is his own secretary of state. Marco Rubio — who as senator was one of the loudest critics of TikTok's ties to China, and a huge backer of the app's ban — has been conspicuously silent as Trump has repeatedly granted more time to strike a deal for its sale. 'You have to decide what's more important, our national security and the threat that it poses to our national security,' Rubio told POLITICO in March 2023, as Congress was considering a ban. 'You have to weigh that against what you might think the electoral consequences of it are. For me, it's an easy balancing act. I mean, there is no balance. I'm always going to be for our national security.' A spokesperson for Rubio at the State Department did not respond to a request for comment. Democrats — even those who support keeping TikTok online — say Trump's approach is the wrong one. 'These endless extensions are not only illegal, but they also put TikTok's fate in the hands of risk-averse corporate shareholders,' Sen. Ed Markey (D-Mass.) told POLITICO in a statement. 'This is deeply unfair to TikTok's creators and users. I'm prepared to work towards a solution, but Trump isn't coming to the table.'
Yahoo
an hour ago
- Yahoo
The bond market has been on a roller coaster ride this year. Here are 3 predictions for what comes next.
Bond yields have swung wildly in the first six months of Trump's presidency. The roller coaster ride for yields has stemmed from concerns about tariffs and US debt. Strategists at SocGen said are eyeing developments ahead for the bond market. It's been a volatile year so far for the bond market, with deficit fears, tariff tantrums, and skittishness about foreign buyers, but there are still fresh developments ahead that could shake things up, Societe Generale said. Strategists pointed to the handful of fits US bond investors have thrown so far this year, largely stemming from concern about President Donald Trump's tariff agenda and fears over the rising budget deficit in the US. The worry is both that tariffs will raise inflation, which will keep interest rates high, and that the national debt is scaling to an unsustainable level. Both possibilities are making investors less willing to hold onto US Treasury bonds unless the government offers more attractive yields. "The first six months of the Trump administration have rattled bond markets, putting pressure on the long end of yield curves," strategists wrote in a note on Friday. "A shift away from long bonds and dollar assets could continue, but this will not be a straightforward process." Here are three things the bank sees coming next for the bond market. The bond market could see a wave of new Treasurys being issued as the government borrows more money and the Fed continues quantitative tightening, a practice that reduces the amount of US government bonds held by the central bank. Congress is expected to lift the federal debt ceiling sometime in August. Once the ceiling is raised, the Treasury Department will need to build back its account by issuing more nominal coupons, with it likely picking up the pace of issuance by February of next year, SocGen strategists estimated. If the debt ceiling isn't lifted, the Treasury General Account could be "totally exhausted" by October, per SocGen's projection. Investors, meanwhile, have appeared more cautious on Treasurys recently. Demand at the most recent 20-year government bond auction was weaker than expected, and foreign participation was the lowest in five years, according to Bank of America. "Rising debt and QT will continue to flood the markets with bonds," the SocGen strategists wrote. "There is appetite, but a shift away from long bonds and dollar assets is becoming apparent." SocGen fleshed out several scenarios for what could happen to the 2-year and 10-year US Treasury yields over the next four quarters. Here are the bank's forecasts for the 2-year and 10-year yields by the end of the fourth quarter of 2025: Scenario Description 2-year yield 10-year yield Base Case The Fed eases its policy modestly and cuts rates twice by the end of the year. 3.75% 4.25% Bull Case The Fed cut rates aggressively as it sees fundamentals in the economy deteriorating. 3.25% 4.00% Bear Case The Fed keeps rates restrictive in response to sticky inflation. 3.90% 4.60% Across all scenarios, yields will remain well above where they were five years ago. US stablecoins, which are backed by reserves of liquid assets such as short-term Treasurys, could help lift demand for government bonds. Assets under management by stablecoin issuers are around $234 billion, reflecting a 74% increase from 2023, SocGen said. That number is expected to increase to $2 trillion by the end of 2028, according to an estimate from the Treasury Borrowing Advisory Committee. Stablecoins were also the third-largest buyer of US T-bills in 2024, behind JPMorgan's government money market fund and China. "A plausible, though highly uncertain, scenario is for stablecoins to absorb approximately 20% of expected net bill issuance over the next three years," SocGen strategists said. In a previous note, Bank of America estimated that each $1 vested in stablecoins by traditional banks could represent $0.90 in additional demand for US Treasurys. The bank said demand from stablecoin issuers could be a future source of volatility for the Treasury market. Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
