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Prior -0.2%The much softer reading here owes a lot to base effects, in particular the impact of energy prices. That is also the main reason for the drag on the year-on-year reading, which was 3.0% lower than January 2025. When energy prices are excluded, producer prices in January 2026 rose by 0.6% compared with December 2025. And compared to January 2025, producer prices rose by 1.2% when excluding the impact of energy prices.Compared with December 2025, energy prices dropped by 3.2% on the month. And when paired against the same month from a year earlier, energy prices were down 11.8%. So, that is the biggest drag on the headline estimate.Looking at the breakdown for other components, there were increases in the price for capital goods (+0.6%), durable consumer goods (+0.7%), and intermediate goods (+0.9%) on the month. And that was slightly offset by a drop in prices for non-durable consumer goods (-0.4%).
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
So, producer prices are showing a notable dip, and here’s why that matters: a 3.0% year-on-year decline signals potential deflationary pressures that could impact market sentiment. This drop is largely attributed to base effects from energy prices, which can skew perceptions of inflation. When energy prices are stripped out, the underlying producer prices still rose, suggesting that core inflation might be more stable than the headline number indicates. For traders, this divergence is crucial. If energy prices stabilize or rebound, we could see a reversal in the current trend, impacting commodities and related markets. Watch for how this plays out in the next few weeks, especially as we approach key economic indicators like the upcoming CPI report. If core prices continue to rise, it could signal a shift in Fed policy, affecting forex pairs and equities alike. Keep an eye on technical levels around recent lows for commodities, as any bounce could trigger buying interest. In the current environment, it’s worth questioning whether the market is overreacting to the headline numbers. The real story is in the core data, which may not be as weak as it seems. Be prepared for volatility as traders digest these mixed signals.
📮 Takeaway
Monitor the upcoming CPI report closely; if core prices rise, expect potential shifts in Fed policy and market reactions.
