U.S. wholesale prices experienced a greater-than-expected increase of 0.5% in December, according to the Labor Department's report on Friday. This Producer Price Index (PPI) reading, which tracks inflation before it reaches consumers, marks the fastest pace in three months, exceeding economists' predictions of a 0.3% rise.

The Bureau of Labor Statistics indicated that the increase in final demand prices was largely driven by a 0.7% advance in the index for final demand services. In contrast, prices for final demand goods remained unchanged. Two-thirds of the increase in final demand services can be attributed to a 1.7% increase in margins for final demand trade services. The price of goods, including items like appliances and automobiles, remained stable in the past month, but are up 2.5% compared to the previous year.

Compared to December 2024, producer prices rose by 3%. This figure aligns with what forecasters had anticipated. The PPI excluding foods, energy, and trade services, considered the core PPI, increased by 0.4% in December, marking the eighth consecutive monthly increase. In 2025, this index rose 3.5%, following a 3.6% increase in 2024. The core PPI, which excludes volatile food and energy prices, rose 0.7% month-on-month in December, above forecasts of a 0.2% rise.

The rise in service prices, which increased 0.7% from November, was the most significant since July, primarily due to increased profit margins for wholesalers and retailers.

Breaking down the specifics, machinery and equipment wholesaling margins saw a notable increase of 4.5%. Several factors influenced the movement of goods prices. Nonferrous metals experienced a surge of 4.5%, and there were also increased costs for residential natural gas, motor vehicles, soft drinks, and aircraft and aircraft equipment. Conversely, diesel fuel prices fell sharply by 14.6%, and declines were also noted in gasoline, jet fuel, beef and veal, and iron and steel scrap.

On an annual basis, the headline producer inflation remained steady at 3%, which was higher than the anticipated slowdown to 2.7%. Core producer inflation accelerated to 3.3% from 3%, also exceeding the forecasted 2.9%.