US inflation data sent a mixed but market-friendly message. Prices paid to producers rose a mild 0.2% in November and 3.0% year over year, while “core” producer prices excluding food and energy were flat on the month, according to BLS PPI figures. The report was delayed by a 43-day government shutdown, which complicates trend-reading but still provides a window into whether tariffs are feeding through to prices.
The composition matters. Producer goods prices rebounded 0.9%, with energy up 4.6% and accounting for more than 80% of the move, per CNBC’s breakdown. Services prices were unchanged, and trade-service margins fell 0.8%, a sign some firms may be eating tariff costs rather than passing them along immediately, as described in the Reuters report.
At the same time, consumers kept spending. Retail sales rose 0.6% in November, beating the 0.4% estimate, while sales excluding autos were up 0.5%, per Commerce Department data. Year over year, sales were up 3.3% versus CPI inflation of 2.7%, implying real consumption growth is still positive even after a bruising rate cycle.
Why it matters now. Softer wholesale inflation reduces pressure for further tightening, but firm demand makes it harder for inflation to glide back to target quickly. The Fed is widely expected to hold its benchmark rate at 3.50% to 3.75% at its Jan. 27-28 meeting, per the Reuters preview. That’s a sharp turn from prior cycles where weak inflation prints quickly translated into easier policy.
Readers should treat this as a “no landing, slower inflation” setup until either energy shocks fade and core inflation keeps cooling, or spending re-accelerates enough to reheat prices.
