US DATA: Core PPI Inflation Trends Accelerate Further Into Year-End

Core PPI was a little stronger than expected in December, building on recent strength to leave a Y/Y running at 3.50% and the last six months at 5.2% annualized for the strongest since mid-2022. 

• Final demand PPI inflation was easily stronger than expected in December at 0.45% M/M (cons 0.2) after 0.24% M/M, but it was boosted by the volatile trade services category bouncing 1.7% M/M.
• We focus on PPI ex food, energy & trade services, which was also firmer than expected but by a lesser extent at 0.36% M/M (cons 0.3).
• This core CPI metric saw minimal revisions to prior months (a touch lower recently, with offsetting strength further back), leaving months oscillating between solid and strong readings including 0.22% M/M in Nov, 0.67% in Oct, 0.25% in Sep, 0.34% in Aug and 0.68% in Jul.
• It left core PPI inflation running at 3.50% Y/Y (cons 3.4) after a slightly upward revised 3.54% in Nov, with these latest two 3.5% months running at their highest since March.
• Recent trend rates point to further upward momentum in the Y/Y, with the six-month running at 5.2% annualized for its strongest since Aug 2022.
• Core goods CPI inflation has been more subdued recently, with the ex-used vehicles series firming to only 0.16% M/M in December after falling an average -0.04% M/M across Oct-Nov.
• Indeed, Fed Chair Powell said at the FOMC press conference that “a lot” of the tariff impact has already worked its way through the economy.
• However, as we noted the NY Fed’s GSCPI pointed to the highest global supply chain pressures in nearly three years in December at 0.5 standard deviations above average.