Analysts expect wholesale inflation to have cooled down (somewhat) in January

On Friday, the Bureau of Labor Statistics will be releasing the producer price index for January. It’s one of the reports the Fed is closely watching as it tries to figure out whether the bigger danger to this economy right now is aggressive price gains or anemic job gains.

The Fed’s preferred measure of consumer inflation — the personal consumption expenditure price index, or PCE — trended up in the last three months of 2025 and sat at 2.9% annual growth in December. That’s not a great sign.

The consumer price index has been looking a bit tamer. In January, it was up 2.4% year-over-year, which was a decline from December. Meanwhile, inflation for producer prices ticked up in December — rising by 3% year over year, which is well above the Fed’s overall inflation target.

Let’s start with a simple definition: “Producer price inflation is wholesale inflation. It’s not the one that faces consumers, but it dictates decisions that companies have to make and how they’re raising prices,” explained Ross Mayfield, an investment strategist at Baird — which is a Marketplace underwriter.

He expects Friday’s report to show PPI cooled off a bit in January and continued to be driven by rising prices for services.

“Services inflation — it’s typically the thing the Fed cares more about, because it’s more reflective of the underlying economy, the labor market,” he said.

Which services are driving wholesale inflation? “Utilities and energy. Interestingly, utilities have also been driving consumer prices higher,” said Scott Helfstein at investment firm Global X.

Blame power-hungry data centers in part for that. “We’ve also seen professional services, everything from accounting to waste management, driving prices.”

Where there’s been sharp goods inflation is for raw materials and other inputs for manufacturing and construction, which face high import taxes.

“It’s pretty staggering,” said Ken Simonson, chief economist at Associated General Contractors of America. “Construction was definitely hit hard by the tariffs on aluminum, steel, and copper.”

Prices were up 28%, 17%, and 11% last year, repsectively; appliance and furniture prices were also up sharply. Simonson said all this has led clients to hold off on starting new construction projects — from factories to houses.