The US Producer Price Index (PPI) for December showed an annual increase of 3%, surpassing the expected 2.7% and matching the previous figure of 3.00%. The core PPI for the same period rose 3.3% year-over-year, exceeding the forecast of 2.90% and the prior reading of 3.00%. Following the data release, the US Dollar Index (DXY) experienced a brief uptick of nearly 10 points, while US Treasury yields also edged higher.

A significant driver was a sharp increase in service costs, with the trade margins indicator recording its largest gain since mid-2024. The price rise in this category was primarily attributed to improved profit margins for wholesale machinery and equipment. However, goods prices remained unchanged after increasing in the previous month.

The PPI data largely aligns with figures released earlier this month; the US Consumer Price Index (CPI) for December, announced in mid-January, showed a 2.7% year-over-year increase, consistent with market expectations and the previous value. The month-over-month CPI increase was 0.3%, also matching both market forecasts and the prior reading. The latest PPI suggests that some companies are passing on higher tariffs for imported raw materials used in production to consumers.

Although inflation levels have risen relative to the Federal Reserve's target, the tariff-induced hyperinflation "anticipated" by Democrats in their survey responses has yet to materialize. Analysis indicates that Federal Reserve Chair Jerome Powell previously mentioned he expects the December core Personal Consumption Expenditures (PCE) price index to show an annual increase around 3.0%. Because markets are still awaiting data releases next week, with the non-farm payrolls report being the primary focus, this PPI report is unlikely to trigger significant market volatility.