WASHINGTON — U.S. wholesale prices surged in February at the fastest monthly pace in nearly a year, delivering an unwelcome shock to markets already unnerved by the Iran war's impact on energy costs. The Producer Price Index for final demand climbed a seasonally adjusted 0.7% last month, the Bureau of Labor Statistics reported Wednesday morning, compared with the 0.3% increase that economists polled by Dow Jones had projected. It was the largest single-month advance in the PPI since July 2025.
On a 12-month basis, headline PPI accelerated from 2.9% to 3.4%, reaching its highest annual rate since February 2025. Core PPI, which strips out volatile food and energy components, rose 0.5% on the month — also well above the 0.3% estimate — lifting the year-over-year core rate to 3.9%, its loftiest reading in over a year. The 'super-core' measure, closely watched by Federal Reserve officials as a proxy for underlying service-sector inflation, posted its tenth consecutive monthly increase.
The breakdown of February's data revealed broad-based pressure on both sides of the ledger. Final demand goods prices surged 1.1%, the largest monthly gain for goods since 2023, with fresh and dry vegetable prices exploding 48.9% — a weather-driven spike that may prove temporary but nonetheless contributed significantly to the headline figure. Services prices for final demand rose 0.5%, a deceleration from January's 0.8% gain but still the third straight monthly increase, suggesting the long-hoped-for cooldown in service-sector inflation has yet to materialize.
The data's timing was particularly consequential, landing just hours before the Federal Open Market Committee was scheduled to release its interest rate decision and updated Summary of Economic Projections. The PPI is widely regarded as a leading indicator of consumer price inflation because producers typically pass input cost increases through to end buyers over subsequent weeks and months. With oil prices already running well above $100 per barrel due to the Iran conflict, the February PPI raises the prospect that March and April CPI prints could be materially worse than current market forecasts.
Equity futures reversed early gains immediately following the report's release at 8:30 a.m. Eastern. The S&P 500 futures fell roughly 0.4%, wiping out an advance of 0.6% that had been built on overnight optimism around AI chip earnings. The 10-year Treasury yield ticked up to 4.21%, and the dollar strengthened modestly. Small-cap stocks, measured by the Russell 2000, bore the brunt of the repricing, falling 0.84% as the prospect of a higher-for-longer rate environment weighed most heavily on interest-rate-sensitive companies.
Goldman Sachs and JPMorgan economists both revised upward their forecasts for the Fed's preferred inflation gauge, the PCE deflator, in the wake of the PPI release. Sonu Varghese of Carson Group called the data 'the calm before the storm,' noting that tariff impacts and energy costs will compound further in March data. For fixed income investors, the print solidifies the case that the Fed's dot plot, due Wednesday afternoon, will show fewer projected rate cuts in 2026 than the one cut currently penciled in, potentially shifting to zero cuts — a seismic recalibration of monetary policy expectations.