US Wholesale Prices Defy Market Estimates With Flat Reading for February

Wholesale prices were unchanged in February, offering welcome news for businesses and consumers amid increasing uncertainty.

Core PPI, a gauge that excludes food and energy costs due to their volatility, tumbled 0.1 percent from January to February. This is down from the previous month’s upwardly adjusted 0.5 percent jump.

Economists had anticipated a 0.3 percent increase for both readings.

Core producer prices excluding trade services rose 0.2 percent.

The PPI report revealed a 0.2 percent decline in services, the largest drop since July 2024, and a 0.3 percent boost in goods. Forty percent of the decrease in final demand services was due to a 1.4 percent slide in margins for machinery and vehicle wholesaling.

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Final demand for goods increased by 0.3 percent. According to the BLS, two-thirds of the February jump was due to egg prices, which have skyrocketed recently amid the ongoing avian flu outbreak. However, these numbers could be a lagged indicator since egg prices have plunged 36 percent after reaching a record high earlier this month.

Overall, on a 12-month basis, PPI and core PPI edged lower to a better-than-expected 3.2 percent and 3.4 percent, respectively.

The PPI figures come one day after the BLS released the February Consumer Price Index (CPI) report that showed the headline annual inflation rate decelerating to a softer-than-expected 2.8 percent.

“Yesterday’s good news on CPI was followed up by good news on PPI today,” said Chris Zaccarelli, the CIO for Northlight Asset Management, in emailed comments to The Epoch Times.

“Of course, this is only one month—and doesn’t yet include the impact of tariffs—so many people will discount these numbers, however, they do speak to the underlying trend pre-tariffs-taking-effect, and at least we are starting from a better place.”

Economists pay attention to the PPI data because it can often serve as a precursor to future consumer inflation trends.

Market Reaction

U.S. stocks had little reaction following the PPI data.

The leading benchmark averages were flat before the opening bell.

The greenback surged midweek as the U.S. Dollar Index (DXY) firmed above 104.00. The index, a metric of the buck against a weighted basket of currencies like the euro and Japanese yen, has tanked this year, falling more than 4 percent.

While the financial markets have been shrugging off the latest cooling inflation data, the figures should offer hope that the Federal Reserve could restart its easing cycle soon, says Tom Essaye, the founder and president of Sevens Research Report.

“Bottom line, the headline and details of the inflation report will give the Fed renewed confidence that inflation is continuing to move slowly toward their ultimate 2.0 percent target,” Essaye said in a note emailed to The Epoch Times. “However, it’s not there yet and so this didn’t make the market price in any more than the two to three expected rate cuts in 2025.”

Softer inflation data could help reverse some of the recent uptick in inflation expectations, says Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

“If we are lucky, the softer-than-expected inflation figures could help taming the inflation expectations that have risen significantly with the tariff walkdown,” she said in an emailed note to The Epoch Times.

Several consumer surveys, from the University of Michigan’s Consumer Sentiment Index to The Conference Board’s Consumer Confidence Index, have revealed a significant increase in households’ one-year inflation outlooks.

Meanwhile, Essaye noted that another positive outcome of these reports is that they counter stagflation fears that have traveled through Wall Street.

Economists have been discussing the odds of stagflation—an economic climate of elevated inflation, anemic growth, and rising unemployment—hitting the United States comparable to what happened in the 1970s. These concerns have popped up regularly over the last 40 years without materializing, but recent economic conditions have fueled upside stagflation risks.

“We expect the incoming Trump administration’s policies to have a mildly stagflationary impact on the economy,” said Paul Ashworth, the chief U.S. economist at Capital Economics, in a recent first-quarter economic outlook.

The firm expects core inflation to head toward the U.S. central bank’s 2 percent target. However, according to Ashworth, “the return of core inflation to close to 2 percent will likely prove short-lived” amid changes to trade and immigration policy.

The Trump administration has shrugged off the recent market turmoil, signaling that the United States is going through an “economic transition.”

“We are in a period of economic transition from that economic nightmare under a president who had no idea what he was doing, never held a private sector job in his life, into a golden age of American manufacturing,” press secretary Karoline Leavitt told reporters at the White House this week.