Yesterday, Jerome Powell prematurely praised a decline in services inflation. 
Today, the BLS released its report on PPI Final Demand for December 2025.
PPI Final Demand Month-Over-Month
- Final Demand: 0.5 percent
- Final Demand Goods: 0.0 Percent
- Final Demand Services: 0.7 percent
- Final Demand Food: -0.3 percent
- Final Demand Less Food and Energy: 0.7 percent
Final Demand Services
- The index for final demand services advanced 0.7 percent in December, the largest increase since moving up 0.9 percent in July. Two-thirds of the broad-based December rise in prices for final demand services can be traced to a 1.7-percent jump in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) The indexes for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services also moved up, 0.3 percent and 0.5 percent, respectively.
- Product detail: Over 40 percent of the December increase in prices for final demand services can be traced to a 4.5-percent rise in margins for machinery and equipment wholesaling. The indexes for guestroom rental; food and alcohol retailing; health, beauty, and optical goods retailing; portfolio management; and airline passenger services also advanced. Conversely, prices for bundled wired telecommunications access services fell 4.4 percent. The indexes for automotive fuels and lubricants retailing and for long-distance motor carrying also moved lower.
Final Demand Goods
- Prices for final demand goods were unchanged in December following a 0.8- percent increase in November. In December, a 0.4-percent advance in the index for final demand goods less foods and energy offset declines in prices for final demand energy and for final demand foods, which fell 1.4 percent and 0.3 percent, respectively.
- Product detail: Within final demand goods in December, the index for nonferrous metals moved up 4.5 percent. Prices for residential natural gas, motor vehicles, soft drinks, and aircraft and aircraft equipment also increased. In contrast, the index for diesel fuel dropped 14.6 percent. Prices for gasoline, jet fuel, beef and veal, and iron and steel scrap also decreased.
Margins for machinery and equipment wholesaling jumped. But why?
The report did not say, but tariff passthrough seems likely.
Intermediate Demand
Within intermediate demand in December, prices for processed goods edged down 0.1 percent, the index for unprocessed goods increased 2.3 percent, and prices for services advanced 0.7 percent.
Intermediate Demand Processed Goods
- Processed goods for intermediate demand: Prices for processed goods for intermediate demand moved down 0.1 percent in December after rising 0.5 percent in November. A major factor in the decline was the index for processed energy goods, which fell 2.4 percent. Prices for processed foods and feeds decreased 1.3 percent. Conversely, the index for processed materials less foods and energy increased 0.7 percent. Prices for processed goods for intermediate demand rose 3.4 percent in 2025 following a 0.1-percent advance in 2024.
- Product detail: Leading the December decline in prices for processed goods for intermediate demand, the index for diesel fuel dropped 14.6 percent. Prices for jet fuel, gasoline, agricultural chemicals and chemical products, and natural cheese (except cottage cheese) also fell. In contrast, the index for nonferrous mill shapes rose 2.6 percent. Prices for utility natural gas, electric power, and synthetic organic plasticizers also advanced.
Intermediate Demand Unprocessed Goods
- Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand moved up 2.3 percent in December, the largest increase since jumping 5.8 percent in January. More than three-fourths of the December rise can be traced to prices for unprocessed energy materials, which advanced 5.5 percent. The index for unprocessed nonfood materials less energy moved up 2.6 percent. Conversely, prices for unprocessed foodstuffs and feedstuffs decreased 0.6 percent. The index for unprocessed goods for intermediate demand fell 0.3 percent in 2025 after rising 4.5 percent in 2024.
- Product detail: A major factor in the December increase in prices for unprocessed goods for intermediate demand was the index for natural gas, which jumped 34.8 percent. Prices for raw milk, nonferrous metal ores, nonferrous scrap, slaughter poultry, and slaughter cows and bulls also advanced. In contrast, the index for slaughter hogs declined 10.1 percent. Prices for crude petroleum and for carbon steel scrap also fell.
Looking Ahead Key Points
- Intermediate demand will soon impact final demand.
- Diesel is not going to drop another 14.6 percent. It’s going to rise.
- With the price of crude rising, don’t expect tame energy prices next month.
- With health care costs soaring, don’t expect tame services either.
- Companies that provide health care for their employees are going to see huge related jumps in their costs.
On January 28, I noted Fed Holds Interest Rate Steady at 3.5 to 3.75 Percent. Two Dissents for Cuts
I expect questions on the US dollar. And I expect Powell will not answer. We will soon find out.
Where Things Stand Synopsis
In the press conference, reporters asked at least four questions on the dollar. And Powell refused to answer all of them.
I will answer. A falling dollar puts upward pressure on prices. It’s pathetic that Powell would not at least admit that.
Powell did comment multiple times on services inflation. The Fed expects services inflation to drop. I don’t, and health care is my primary reason.
I also think oil has bottomed. If so, that will put upward pressure on energy, with natural gas already soaring.
Part of natural gas in the extreme cold lately. But the other part is AI related. AI-demand for energy is a one-way street higher.
Related Posts
January 14, 2026: The Fed Has Missed Its Inflation Target on Ten Different Measures
The Atlanta Fed tracks various inflation targets. Let’s have a look.
January 27, 2026: Trump Cheers a Plunge of the US Dollar “I Think It’s Great”
“Look at all the business we are doing,” says Trump.
And for a look at what health care will do to the PCE price index, please see Expect a Big Divergence This Year Between CPI and PCE Inflation
Rent and Healthcare go different ways in 2026. Plus there are huge timing issues.
The Fed is not in a good place, as it claims.
And finally, please consider Dear Zoomers, Trump Says He “Wants to Drive Up Housing Prices”
Somehow, I doubt Gen Z will like this message.
Economic madness is everywhere.
Not long ago, Trump bragged about worker raises. But increases in labor costs are passed on by corporations as inflation in product prices and service costs. Past inflationary cycles were met with government wage freezes to break the spiral. It was a political third rail. This was the reason behind the manipulation of inflation rate to 2 percent. Since raises are often calculated using 1.5 times the rate of inflation, average raises were kept to 3 percent. Now that inflation has broken free of the gerrymandered 2 percent box, a 3 percent inflation rate increases average raises to 4.5 or 5 percent. A noticeable change in prices once companies pass on the cost.
Powell has lost control of the money supply.
The excuse I’ve seen about the metals smackdown was about Trump saying he wants a Warsh to the new Fed Chair. But in reality, it looks like the hot inflation numbers means that rates will need to go up, which means that the dollar will get stronger, which means that metals will go down. This won’t change with whomever is the Chair.
PMs had gone parabolic, way above 200 day average, so a correction was inevitable, although even I was surprised by the size of the dump on silver.
I got my timing bang on for the first time ever by calling the top on ths blog on thursday.
The wider question is are PMs in a bubble or is this just a short term correction?
I think probably the former and that the dollar will rally from here and silver will be back to 40 usd in a few months and gold be around 3000 by end of year.
Why don’t you go ahead and call the bottom for us all while you’re at it.
WOW! My mining stocks got monkey hammered today. I did don’t lighten up enough coming into this one and got a tidy spanking!
I’m a long term holder but lost 20% of my two and a half year long paper gains in one day!
Ya play with fire? You are going to get burned!
😉
Have to confess to buying more PAAS and AEM at the close to try to grab the falling knife by the handle…
The fundamentals have not changed and we needed a solid correction to the parabolic spike. I can only imagine what happened to those that were leveraged. Iguanas falling from trees in Florida and gold traders falling from buildings.
Some will only tell you about their wins. I’m always partial to seeing/telling both sides of the story. I guess I’ll never win any Trump “I’m always right” award.
But I have a clean conscience and can sleep well at night!
I saw it as a buying opportunity… luckily I don’t have that much yet. Bought NEM and then it dropped another 5% 😛
For no rational reason whatsoever as far as I can tell. Feels like the ol’ trumparooo trade. Hopefully we’ve bet with his handpicked insiders.
come on man, you should have sold calls as soon as it went parabolic, it was easy money and you lower your cost basis. it’s profit 101, sell high buy back low.
20 percent fall in 24 hours demonstrates just how volatile this sector can be. I think a lot of people have bought into PMs over the last two years without a knowledge of their volatility as number only go up, if those investors now start doing some historical research they may get out of the sector entirely.
What’s there to move into that isn’t also wildly inflated?
Lower interest rates will fix this problem!
Good Humor!
Ice cream?
The jump in machinery and equipment can not be assumed to be tariffs as the measure is margins not end price.
Oops
Rates are going to need to go up – between this and dollar.
Fed already behind again
So Trumps Fed pick had a trip to Epstein Island?
Birds of a feather and all
Mandatory requirement so that there can be pictures of him that Trump can use to control him.
Economicmadness is everywhere indeed.It’s preposterous to think inflation is contained when every policy seems inflationary and everyone wants the beneficial portion of the inflation—their increase in wealth—to persist, just not prices for those things they themselves want or need to buy.
A camel and an eye of a needle come to mind.
And the stimulus refund money will be hitting soon. I am sure we will see a Mish article about that in a couple of months…
Waiting for a check it’s going to be a long wait maybe around Election Day and it’s not a given have you heard about tacos instead….
“ Prices for jet fuel, gasoline, agricultural chemicals and chemical products, and natural cheese (except cottage cheese) also fell.”
I think that it was the cottage cheese that pushed us over the edge.
lol lol
I was struck that the government would even keep track of this “category”. What percent of the economy is cottage cheese? Even in a senior living facility or a nursing home, a doubling in the price of cottage cheese wouldn’t even elicit a blink.
Unless there were some lactose intolerant septuagenarians strolling about. Then it may be welcome!
LOL!!!