Services PPI surged for the second month, up another 0.8 percent.
Today, the BLS released its report on PPI Final Demand for January 2026.
PPI Final Demand Month-Over-Month
- Final Demand: 0.5 percent
- Final Demand Goods: -0.3 Percent
- Final Demand Services: 0.8 percent
- Final Demand Food: -1.5 percent
- Final Demand Less Food and Energy: 0.8 percent
Final Demand Services
- The index for final demand services advanced 0.8 percent in January, the largest increase since moving up 0.9 percent in July 2025. Most of the January rise in prices for final demand services can be traced to margins for final demand trade services, which jumped 2.5 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand transportation and warehousing services advanced 1.0 percent, while the index for final demand services less trade, transportation, and warehousing was unchanged.
- Product detail: Over 20 percent of the January increase in prices for final demand services is attributable to a 14.4-percent jump in margins for professional and commercial equipment wholesaling. The indexes for apparel, footwear, and accessories retailing; chemicals and allied products wholesaling; bundled wired telecommunications access services; health, beauty, and optical goods retailing; and food and alcohol retailing also moved higher. Conversely, prices for system software publishing fell 12.2 percent. The indexes for guestroom rental and for apparel wholesaling also decreased.
This is the second month margins for commercial equipment wholesaling jumped.
Last month I commented “Margins for machinery and equipment wholesaling jumped. But why? The report did not say, but tariff passthrough seems likely.”
Final Demand Goods
- Prices for final demand goods moved down 0.3 percent in January, the largest decrease since falling 0.7 percent in March 2025. Leading the January decline, the index for final demand energy dropped 2.7 percent. Prices for final demand foods decreased 1.5 percent. In contrast, the index for final demand goods less foods and energy advanced 0.7 percent.
- Product detail: Nearly 80 percent of the January decline in prices for final demand goods can be traced to the index for gasoline, which fell 5.5 percent. Prices for chicken eggs, electric power, gas fuels, fresh fruits and melons, and ethanol also moved lower. Conversely, the index for search, detection, navigation, and guidance systems jumped 15.5 percent. Prices for nonferrous metals and for pork also rose.
Energy will not repeat next month. It will add to goods inflation.
Intermediate Demand
Within intermediate demand in January, prices for processed goods were unchanged, the index for unprocessed goods fell 0.5 percent, and prices for services moved up 0.3 percent.
Intermediate Demand Processed Goods
- The index for processed goods for intermediate demand remained unchanged in January. A 0.5-percent increase in prices for processed materials less foods and energy offset declines in the indexes for processed energy goods and for processed foods and feeds, which fell 2.0 percent and 0.6 percent, respectively. For the 12 months ended in January, prices for processed goods for intermediate demand rose 2.6 percent.
- Product detail: Within processed goods for intermediate demand in January, the index for nonferrous metals moved up 4.8 percent. Prices for industrial gases; search, detection, navigation, and guidance systems; paints and allied products; and industrial natural gas also increased. In contrast, the index for gasoline declined 5.5 percent. Prices for commercial electric power, industrial electric power, ethanol, and confectionery materials also fell.
Intermediate Demand Unprocessed Goods
- The index for unprocessed goods for intermediate demand moved down 0.5 percent in January after advancing 1.9 percent in December. The decline is attributable to prices for unprocessed foodstuffs and feedstuffs, which decreased 3.5 percent. Conversely, the indexes for unprocessed nonfood materials less energy and for unprocessed energy materials rose 2.6 percent and 0.4 percent, respectively. For the 12 months ended in January, prices for unprocessed goods for intermediate demand fell 6.1 percent, the largest 12-month decline since dropping 8.2 percent in September 2024.
- Product detail: A major factor in the January decline in the index for unprocessed goods for intermediate demand was a 9.8-percent drop in prices for raw milk. The indexes for ungraded chicken eggs, corn, oilseeds, natural gas, and fresh fruits and melons also moved lower. In contrast, prices for nonferrous scrap rose 8.5 percent. The indexes for crude petroleum and for slaughter chickens also advanced..
Where Things Stand Synopsis
Last month, I commented “Yesterday, Jerome Powell prematurely praised a decline in services inflation.”
That was immediately followed by a 0.7 percent jump in services PPI.
This month, there is another 0.8 percent jump in services PPI.
In the press conference following the December rate cut announcement (no change), 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.
However ….
It’s the Reaction that Matters Most
It’s not the news that matters the most, it’s the reaction to the news. We saw that yesterday with a negative reaction to Nvidia sales. And we see it again today in the bond market.
The bond market reacted as if today was good news. Yield on the long bond fell 3 basis points to 4.64 percent. Yield on the 5-year note fell 6 basis points.
A month ago, the long bond was on the verge of breaking out above 5 percent.
My view is the bond market senses weakness somewhere. I suspect both AI and jobs. Jobs may be in serious trouble.
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.
January 30, 2026: Dear Zoomers, Trump Says He “Wants to Drive Up Housing Prices”
Somehow, I doubt Gen Z will like this message.
And finally, please consider Nvidia Dives After Posting Record Beat the Street Numbers. Why?
The answer is easy, but analysts are perplexed.
I remain flexible on the outcome, but for now, the bond market seems to be ignoring stagflationary data.
No surprise that gold is back up to $5,300 and silver to $94 with inflation finally being recognized. Got mining stocks? It seems that they have not kept up with the metals price recovery. Except AEM, that is the clear leader of the pack.
HL, AG, PAAS, HYMC and a couple of JR’s just for fun! FGOVF, AZMCF
VZLA is bound to recover from the violence in Mexico…
Information only. I’ve owned this stuff for a while…
Lol. A tariff castrated Trump is asking SCOTUS if he can get his tariff balls back. What happened to all the “I have other ways to tariffs” talk?
https://breakingthenews.net/Article/Trump-on-tariffs-ruling:-Is-readjudication-possible/65766771
United States President Donald Trump took to Truth Social on Friday to once again complain about the Supreme Court’s decision to void his tariffs, asking if a “rehearing or readjudication of this case” was possible.
“It doesn’t make sense that Countries and Companies that took advantage of us for decades, receiving Billions and Billions of Dollars that they should not have been allowed to receive, would now be entitled to an undeserved “windfall,” the likes of which the World has never seen before, as a result of this highly disappointing, to say the least, ruling,” he wrote.
“It doesn’t make sense that Countries and Companies that took advantage of us for decades, receiving Billions and Billions of Dollars that they should not have been allowed to receive, would now be entitled to an undeserved “windfall,” the likes of which the World has never seen before, as a result of this highly disappointing, to say the least, ruling,” he wrote.”
More Trump nonsense. Countries will not receive any “windfall” refunds, because Countries have never paid any tariffs to US Customs. Tariffs are only paid by the US business that imports the item. Refunds can only go to those US companies.
He’s using his Whining Attack, trying to wear them down with incessant melancholy burbling and that boo boo face.
I’m just glad it’s not pointed directly at me. I don’t know that I could withstand it for long. He’d have my Big Mac in under 3 minutes.
I hope you chewed it well and, put extra pickles & mustard on it…
You called it, Mish. At least we have the best economic growth the world has ever seen, and the budget deficit is dropping like the Trump coin. As President Trump brings more peace to the planet, oil prices will continue to drop. I pay $1.89 for gas, and I think that’s too much. I am tired of winning already. 🙂
Wait until Trump tries to invade Iran, then you’ll really be winning!
And miran wants four more rate cuts this year.
Probably wants eight, to please Dear Leader, knows four is the most he can possibly broadcast.
And then one day Winston suddenly realized that the United States had been taken over by foreign interests and had become a balkanized economic Greater North American Co-Prosperity Sphere. But more important, he also realized that he had exhausted his ration cards and was out of synthetic gin.
The way NVidia stock sold off on good news is characteristic of market tops. Stagflation seems to be on the horizon unless they figure out how to manipulate the numbers even more than they do now. A lot of clouds forming on the horizon.
I just went to drop a family member off at the airport. The amount of big rig trucks, cars, worker trucks, deliveries, and other cars on the road during the middle of the day boggled my mind. Never seen this type of traffic during a regular non-holiday work day.
If we are anticipating a recession soon, I don’t understand why there is so much activity. This same family member went out to dinner last weekend and everyone complained about the high cost of food but the restaurant was packed.
On the flip side, three fast food restaurants near my neighborhood just shut down. I can drive by some business districts and it looks like an apocalypse with empty strip malls.
I really don’t understand what’s going on anymore with this economy but the volatility is providing huge profits.
When a complex system becomes unstable, crazy, unexpected things happen.
Went out to dinner at packed restaurant = higher income earners
Multiple fast food places out of business = lower income earners can’t even afford McDonald’s.
Do you think those trucks are servicing the people with more money, less, or everyone equally? Answer on your own terms
K shaped economy
“A month ago, the long bond was on the verge of breaking out above 5 percent.
My view is the bond market senses weakness somewhere. I suspect both AI and jobs. Jobs may be in serious trouble.”
I’m sorry, but my brain is seizing up trying to understand why bond rates would fall in response to a PPI reading that suggests inflation is heading higher. Does the market expect the Fed to raise rates in response? Because that’s not happening.
People are struggling reading.
“My view is the bond market senses weakness somewhere. I suspect both AI and jobs. Jobs may be in serious trouble.”
There was a headline on CNBC that said “10-year yield falls below 4% on stagflation risk following hot producer prices reading”. Inflation with slow growth (stagflation) is still inflation. I understand there are other reasons why bond rates fell today, but it’s not what I would have expected.
Headlines aren’t about facts, but about clicks and eyeballs
What – if anything – does it show that the yield on the 10 year is down 4.7 bps?
I suggest reading my post because I discussed in detail.
I read it, but not carefully enough. Bond market senses weakness. Thanks (and sorry).
We had a hot PCE and two very hot services PPIs.
Yields fell.
This is not what one would expect.
The only two things I can come up with are jobs and an AI pending crash.
There could be other things.
I would say more than likely pending AI crash being the trigger, I was stopped out of Palantir weeks ago …already serious weakness..
War/Iran