WASHINGTON — Inflation at the wholesale level in the United States decelerated last month, offering evidence that pricing pressures might be easing temporarily. Despite this, prospects for ongoing improvement remain uncertain as President Trump escalates trade tensions.
According to the Labor Department, the producer price index, which tracks inflation prior to it impacting consumers, remained flat in February after a notable increase of 0.6% in January. Over the past year, producer prices saw a rise of 3.2%, a decline from the 3.7% year-over-year increase seen in January.
When omitting the often-volatile food and energy sectors, core wholesale prices experienced a minor drop of 0.1% from the previous month, marking the first decline since July. Year-over-year, core producer prices were up by 3.4%, falling short of the 3.8% increase recorded in January. These figures came in below economists’ forecasts.
This data emerges amid escalating trade conflicts initiated by President Trump with several of the United States’ trading partners, potentially exerting upward pressure on inflation. The administration has applied 25% tariffs on imports of foreign steel and aluminum and imposed 20% duties on goods from China. Further plans include 25% tariffs on Canadian and Mexican imports, alongside “reciprocal tariffs” that would match the higher tariffs placed by other countries on American products. Additionally, Trump threatened to levy a 200% duty on European alcoholic beverages should Europe proceed with imposing a tariff on U.S. whiskey.
Large retailers have expressed concerns, suggesting they anticipate a dip in consumer spending throughout the year due to the increased costs resulting partially from the tariffs.
On Wednesday, it was reported by the Labor Department that consumer price inflation had slowed down last month for the first time since September. The consumer price index rose by 2.8% compared to the previous year, down from a 3% increase recorded in January. Meanwhile, core consumer prices noted an annual increase of 3.1%, representing the smallest rise since April 2021.
February saw wholesale gasoline prices drop by 4.7%, while food prices climbed by 1.7%, driven by a substantial 28% rise in egg prices.
The Federal Reserve, having reduced its benchmark rate three times toward the end of 2024, is anticipated to maintain the status quo at its meeting next week. Economists Carl Weinberg and Mary Chen of High Frequency Economics commented that current figures offer no compelling reason for the Fed to consider adjusting interest rates downward. They emphasized the Fed’s current focus on the potential tariff-induced impact on future food prices, rather than past price increases like those of eggs.
Wholesale prices provide a preview of potential consumer inflation trends. They are closely monitored, as some components, particularly those related to health care and financial services, are incorporated into the Federal Reserve’s favored inflation gauge—the personal consumption expenditures (PCE) index. Capital Economics’ Thomas Ryan highlighted that certain wholesale price elements contributing to the PCE measure, including hospital costs and international airfares, exceeded expectations in February.
