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PPI Final Demand Month-Over-Month

Today, the BLS released its report on PPI Final Demand for December 2025.

PPI Final Demand Month-Over-Month

• Final Demand: 0.5 percent
• Final Demand Goods: 0.0 Percent
• Final Demand Services: 0.7 percent
• Final Demand Food: -0.3 percent
• Final Demand Less Food and Energy: 0.7 percent

Final Demand Services

• The index for final demand services advanced 0.7 percent in December, the largest increase since moving up 0.9 percent in July. Two-thirds of the broad-based December rise in prices for final demand services can be traced to a 1.7-percent jump in margins for final demand trade services. (Trade indexes measure changes in margins received by wholesalers and retailers.) The indexes for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services also moved up, 0.3 percent and 0.5 percent, respectively.
• Product detail: Over 40 percent of the December increase in prices for final demand services can be traced to a 4.5-percent rise in margins for machinery and equipment wholesaling. The indexes for guestroom rental; food and alcohol retailing; health, beauty, and optical goods retailing; portfolio management; and airline passenger services also advanced. Conversely, prices for bundled wired telecommunications access services fell 4.4 percent. The indexes for automotive fuels and lubricants retailing and for long-distance motor carrying also moved lower.

Final Demand Goods

• Prices for final demand goods were unchanged in December following a 0.8- percent increase in November. In December, a 0.4-percent advance in the index for final demand goods less foods and energy offset declines in prices for final demand energy and for final demand foods, which fell 1.4 percent and 0.3 percent, respectively.
• Product detail: Within final demand goods in December, the index for nonferrous metals moved up 4.5 percent. Prices for residential natural gas, motor vehicles, soft drinks, and aircraft and aircraft equipment also increased. In contrast, the index for diesel fuel dropped 14.6 percent. Prices for gasoline, jet fuel, beef and veal, and iron and steel scrap also decreased.

Margins for machinery and equipment wholesaling jumped. But why?

The report did not say, but tariff passthrough seems likely.

Intermediate Demand

Within intermediate demand in December, prices for processed goods edged down 0.1 percent, the index for unprocessed goods increased 2.3 percent, and prices for services advanced 0.7 percent.

Intermediate Demand Processed Goods

• Processed goods for intermediate demand: Prices for processed goods for intermediate demand moved down 0.1 percent in December after rising 0.5 percent in November. A major factor in the decline was the index for processed energy goods, which fell 2.4 percent. Prices for processed foods and feeds decreased 1.3 percent. Conversely, the index for processed materials less foods and energy increased 0.7 percent. Prices for processed goods for intermediate demand rose 3.4 percent in 2025 following a 0.1-percent advance in 2024.
• Product detail: Leading the December decline in prices for processed goods for intermediate demand, the index for diesel fuel dropped 14.6 percent. Prices for jet fuel, gasoline, agricultural chemicals and chemical products, and natural cheese (except cottage cheese) also fell. In contrast, the index for nonferrous mill shapes rose 2.6 percent. Prices for utility natural gas, electric power, and synthetic organic plasticizers also advanced.

Intermediate Demand Unprocessed Goods

• Unprocessed goods for intermediate demand: The index for unprocessed goods for intermediate demand moved up 2.3 percent in December, the largest increase since jumping 5.8 percent in January. More than three-fourths of the December rise can be traced to prices for unprocessed energy materials, which advanced 5.5 percent. The index for unprocessed nonfood materials less energy moved up 2.6 percent. Conversely, prices for unprocessed foodstuffs and feedstuffs decreased 0.6 percent. The index for unprocessed goods for intermediate demand fell 0.3 percent in 2025 after rising 4.5 percent in 2024.
• Product detail: A major factor in the December increase in prices for unprocessed goods for intermediate demand was the index for natural gas, which jumped 34.8 percent. Prices for raw milk, nonferrous metal ores, nonferrous scrap, slaughter poultry, and slaughter cows and bulls also advanced. In contrast, the index for slaughter hogs declined 10.1 percent. Prices for crude petroleum and for carbon steel scrap also fell.

Looking Ahead Key Points

1. Intermediate demand will soon impact final demand.
2. Diesel is not going to drop another 14.6 percent. It’s going to rise.
3. With the price of crude rising, don’t expect tame energy prices next month.
4. With health care costs soaring, don’t expect tame services either.
5. Companies that provide health care for their employees are going to see huge related jumps in their costs.

On January 28, I noted Fed Holds Interest Rate Steady at 3.5 to 3.75 Percent. Two Dissents for Cuts

I expect questions on the US dollar. And I expect Powell will not answer. We will soon find out.

Where Things Stand Synopsis

In the press conference, reporters asked at least four questions on the dollar. And Powell refused to answer all of them.

I will answer. A falling dollar puts upward pressure on prices. It’s pathetic that Powell would not at least admit that.

Powell did comment multiple times on services inflation. The Fed expects services inflation to drop. I don’t, and health care is my primary reason.

I also think oil has bottomed. If so, that will put upward pressure on energy, with natural gas already soaring.

Part of natural gas in the extreme cold lately. But the other part is AI related. AI-demand for energy is a one-way street higher.

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January 14, 2026: The Fed Has Missed Its Inflation Target on Ten Different Measures

The Atlanta Fed tracks various inflation targets. Let’s have a look.

January 27, 2026: Trump Cheers a Plunge of the US Dollar “I Think It’s Great”

“Look at all the business we are doing,” says Trump.

And for a look at what health care will do to the PCE price index, please see Expect a Big Divergence This Year Between CPI and PCE Inflation

Rent and Healthcare go different ways in 2026. Plus there are huge timing issues.

The Fed is not in a good place, as it claims.

And finally, please consider Dear Zoomers, Trump Says He “Wants to Drive Up Housing Prices”

Somehow, I doubt Gen Z will like this message.

Economic madness is everywhere.

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