PPI report shows inflation still a thing, and lower prices for farmers also aren't good

If you thought INFLATON WATCH might be fading in 2026, Friday's report on the Producer Price Index says product inputs were still getting more expensive for businesses in January.

The Labor Department reported Friday that its producer price index, which measures inflation before it hits consumers, rose 0.5% from December and 2.9% from January 2025. Economists had forecast a 0.3% increase for the month and 1.6% year over year, according to a survey by the data firm FactSet.

Excluding food and energy prices, which bounce around from month to month, so-called core wholesale prices rose 0.8% from December and 3.6% from January 2025 — both higher than forecasters had expected. The year-over-year increase in core prices was the biggest since March of last year.

Driving the increase was an uptick in the wholesale price of services, led by higher profit margins for retailers and wholesalers. The increase suggests that companies are passing along the cost of President Donald Trump's tariffs to their customers.

“Retailers’ tariff bill has come down marginally in the last few months, but they have continued to lift their selling prices,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, wrote in a commentary.

It seems odd that we’d still be seeing tariff effects starting to kick in 9 months after Trump first announced them, but when you see a 2.9% increase for January in business sales of “private capital equipment” (and 6.9% in the last 2 months) and a 2.4% increase for business sales of “personal consumption goods” (and 3.4% in the last 2 months), I can’t see what else it would be.

You dig into specific products, and it also looks like tariffs were hiking prices for some goods in January.

Change in Producer Prices, January 2026
Communication + Related Equip. +8.6%
Nonferrous Metals +4.9%
Iron and Steel Scrap +3.2%
Electronic Computers + Equip. +1.0%

On the positive side, food prices at the wholesale level dropped by 1.5% for January. And despite not fulfilling a number of promises over the last year, Trump can at least claim success in bringing down the price of eggs!

Change in Producer Prices, January 2026
Eggs -63.9% (!)
Fresh fruits and melons -10.5%
Oilseeds -7.7%
Fresh/dry vegetables -5.7%
Grains -5.6%
Dairy products -1.9%

Now, those price declines might not all be great if you’re a farmer and you’re getting less from your products (a common complaint from ag types about the tariffs, since they can’t sell as much overseas).

Sure enough, we saw farm bankruptcies go up in Year 1 of Trump 2.0, reaching the highest levels since….Trump 1.0. With Wisconsin having the largest increase in the Midwest.

We’ll see if those reduced food prices at the wholesale level translate into lower prices at the supermarket in the coming months, or if those companies grab higher profits as a result prices remain “sticky”.

What’s also concerning in the PPI report is that the 0.5% increase in prices for January would have been even higher, but gasoline dropped by 5.5% and energy overall went down by 2.7%. I don’t see that continuing for much longer given that oil futures had gone up by nearly $10 a barrel since the start of the year, even before we started bombing Iran this weekend on Israel's orders as Trump attempts to distract from the Epstein Files and his other Trump failures.

I don't see it as a good sign when some types of businesses are paying higher prices on one end due to tariff effects and generally higher costs, while more farmers are going bankrupt for the few areas where costs are going down. And what's going to change these trends for the rest of 2026, besides weaker demand from more people losing their jobs in a recession?