U.S. producer prices rose in December, driven not by higher goods prices but by increases in services and wholesale trade margins that are central to how distributors operate.
The Producer Price Index for final demand increased 0.5% in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported Friday. Prices for final demand services advanced 0.7%, while prices for final demand goods were unchanged.
On an unadjusted basis, producer prices rose 3.0% for 2025, following a 3.5% increase in 2024.
Much of December’s increase came from a category that directly reflects distributor economics. The index for trade services margins, which measures changes in margins received by wholesalers and retailers, jumped 1.7%. More than 40% of that increase was tied to a 4.5% rise in margins for machinery and equipment wholesaling, according to BLS.
The data shows distributors widening margins even as many product categories show flat or declining prices.
The final demand of less foods, energy, and trade services — often viewed as a core measure of producer inflation — rose 0.4% in December, the eighth consecutive monthly increase, and increased 3.5% for the year.
Services, Not Goods, Driving Inflation
The December report continues a pattern that defined much of 2025: inflation pressure is concentrated in the services and operating costs that support the supply chain rather than in finished goods.
Prices for transportation and warehousing services rose 0.5% in December. Services for intermediate demand — the costs businesses incur before products reach end users — increased 0.7%, with gains in wholesaling, courier services, and property-related costs.
BLS reported that gross rents for retail properties rose 10.1% within intermediate demand services, a sharp increase that affects distributors operating large branch and warehouse networks.
Meanwhile, goods prices showed mixed movement:
- The index for nonferrous metals increased 4.5%.
- Diesel fuel prices fell 14.6%.
- Prices for gasoline, jet fuel, beef and veal, and iron and steel scrap declined.
In intermediate demand, prices for natural gas jumped 34.8%, while nonferrous mill shapes rose 2.6%.
The divergence underscores volatility in commodity inputs even as operating and service costs trend higher.
Implications for Wholesale Distribution
For distributors across industrial, construction, HVAC, electrical, plumbing and MRO sectors, the report highlights several operating realities:
- Margin expansion is helping offset higher operating costs tied to facilities, labor, logistics and technology.
- Operating costs are rising faster than product costs, increasing the “cost to serve.”
- Volatility in energy and metals complicates purchasing and inventory planning.
- Warehousing and transportation costs continue to climb, making it more expensive to move and store goods.
Upstream Cost Pressure Building
Price increases are also occurring throughout the production pipeline before goods reach customers.
Prices for stage 4 intermediate demand — the last step before products reach end users — rose 0.6% in December and 3.7% for the year. Stage 1 intermediate demand, earlier in the supply chain, increased 3.9% for 2025.
That progression suggests cost pressures are building upstream and may continue to flow through to distributors and customers in early 2026.
Data Collection Delayed by Shutdown
BLS noted that a federal government shutdown in October and November delayed price-update requests to survey respondents. Requests for December pricing data were not sent until Jan. 5. BLS said response rates remained within normal ranges, and no methodological changes were required.
The next PPI report, covering January 2026, is scheduled for release Feb. 27.
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