U.S. wholesale inflation remained flat in February, signaling a slowdown in price pressures. However, the trend may be short-lived as President Donald Trump escalates trade tensions, introducing new tariffs that could drive inflation higher.
The Labor Department reported Thursday that its Producer Price Index (PPI)—which measures inflation before it reaches consumers—remained unchanged from January, following a 0.6% rise the previous month. On a yearly basis, wholesale prices increased 3.2%, down from 3.7% in January.
Excluding volatile food and energy costs, core wholesale prices dipped 0.1%, marking the first decline since July. The year-over-year core PPI rose 3.4%, lower than January’s 3.8% gain and below economists’ expectations.
The data arrives amid Trump’s intensifying trade war. The president has already imposed 25% tariffs on foreign steel and aluminum and 20% levies on Chinese imports. In the coming weeks, he plans to extend 25% tariffs on Canada and Mexico, while introducing “reciprocal tariffs” to match other countries’ import duties on U.S. products.
On Thursday, Trump also threatened a 200% tax on European wine, champagne, and spirits if the EU proceeds with its planned tariff on American whiskey.
Meanwhile, major U.S. retailers warn that rising costs—partially due to tariffs—could lead to reduced consumer spending in 2025.
On Wednesday, the Labor Department also reported a slowdown in consumer price inflation, with the Consumer Price Index (CPI) rising 2.8% year-over-year, down from January’s 3% increase. Core consumer prices climbed 3.1%, the smallest gain since April 2021.
Wholesale gasoline prices fell 4.7%, while food prices rose 1.7%, driven by a 28% surge in egg prices.
With inflation cooling, the Federal Reserve is expected to keep interest rates unchanged at its upcoming meeting. Analysts at High Frequency Economics noted, “The Fed will not see any argument for pushing interest rates lower or sooner in today’s figures.” However, they added that “the Fed is focused now on the impact of tariffs on future food prices much more than it is focused on the impact of egg prices on prior increases.”
Economists monitor wholesale prices as an early indicator of future consumer inflation, particularly in healthcare and financial services, which factor into the Fed’s preferred inflation gauge—the Personal Consumption Expenditures (PCE) Index.
Thomas Ryan of Capital Economics observed that certain PCE components, such as hospital costs and international airfares, were unexpectedly high in February—a potential sign of future inflationary pressure.