WASHINGTON — U.S. wholesale inflation decelerated last month, suggesting that price pressures are easing for now. But the progress may not last as President Trump intensifies his trade wars.
The Labor Department reported Thursday that its producer price index — which tracks inflation before it reaches consumers — was unchanged from January after rising 0.6% the month before. Compared to a year earlier, producer prices were up 3.2%, down from a year-over-year gain of 3.7% in January.
Excluding volatile food and energy prices, so-called core wholesale prices fell 0.1% last month from January, first drop since July. Core producer prices rose 3.4%, lower than the 3.8% year-over-year gain in January. The numbers were all lower than economists had expected.
The readout comes as Trump ramps up his trade war with a wide range of U.S. trade partners, threatening to send inflation higher. He has effectively imposed 25% taxes — tariffs — on foreign steel and aluminum and has plastered 20% levies on Chinese imports. In coming weeks, he is set to impose 25% tariffs on Canada and Mexico and to introduce “reciprocal tariffs” that match higher taxes that other countries slap on U.S. products. And on Thursday the president threatened a 200% on European wine, champagne and spirits if Europe goes ahead with a tariff on U.S. whiskey.
Major retailers have warned that they expect U.S. consumers to pull back spending this year in the face of higher costs, partially from from Trump’s tariffs.
On Wednesday, the Labor Department said that consumer price inflation slowed last month for the first time since September. The consumer price index was up 2.8% from a year ago, down from a 3% year-over-year increase in January. Core consumer prices rose 3.1% from a year earlier, smallest increase since April 2021.
Wholesale gasoline prices fell 4.7% last month. Food prices rose 1.7% from January to February, led by a 28% surge in the price of eggs.
After cutting its benchmark rate three times in late 2024, the Federal Reserve is expected to leave the rate unchanged at its meeting next week. “The Fed will not see any argument for pushing interest rates lower or sooner in today’s figures,” Carl Weinberg and Mary Chen of High Frequency Economics wrote in a commentary Thursday. “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 (producer price) increases.’’
Wholesale prices can offer an early look at where consumer inflation might be headed. Economists also watch it because some of its components, notably health care and financial services, flow into the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures, or PCE, index. Thomas Ryan of Capital Economics noted that some of the wholesale prices that feed into the PCE measure, including hospital costs and international airfares, came in hotter than expected in February.