Services Flat, Pipeline Hot: Jan 14 PPI Masks Stage‑4 Heat and an Energy-Led Goods Pop

On 2026-01-14, the official producer price release billed November as “stable”—headline +0.2% m/m with final demand services “unchanged.” The fine print tells a different story: upstream costs accelerated across the pipeline, with processed intermediate goods +0.6%, unprocessed intermediate goods +0.4%, and services for intermediate demand +0.2%. The production flow confirms that pressure is building: stage 4 intermediate demand rose 0.4% m/m, the sixth straight monthly increase, with 12‑month gains at stage 4 (+3.5%) and stage 1 (+3.7%) now the largest since February 2023.

Here’s what the data reveals:

• Headline stability hides pipeline heat: final demand +0.2% m/m, but intermediate inputs rose broadly; stage 4 +0.4% m/m signals pass‑through risk.

• Goods strength is narrow: final demand goods +0.9% m/m, over 80% of which is energy (+4.6%); gasoline alone drove more than half the goods increase.

• Core decelerated, but optics mislead: core PPI (ex-food, energy, and trade) slowed to +0.2% m/m from +0.7%, masked by a -0.8% drop in trade margins that held total services at 0.0%.

• Revisions changed the slope: August -0.2% m/m (was -0.1%), September +0.6% m/m (was +0.3%). Momentum into autumn was stronger than marketed.

The Pipeline Is Heating While the Headline Stays Cool

“Services unchanged” understates cost pressure. Within final demand services, categories excluding trade and transportation still rose +0.3%, and transportation/warehousing also rose +0.3%. The flat top‑line rests almost entirely on the volatile -0.8% drop in trade services margins—historically the most revision-prone component of this report.

Upstream indicators are even louder. Processed intermediate goods gained +0.6% with energy +3.0%; unprocessed goods rose +0.4% as energy materials increased +1.4% and nonfood materials +1.1% (foodstuffs fell -0.9%). Services for intermediate demand rose +0.2% m/m and +2.5% y/y—the largest 12‑month gain since March.

The production flow confirms pass‑through risk: stage 4 +0.4% m/m, stage 3 0.0%, stage 2 +0.1%, stage 1 +0.2%. With stage 4 logging its sixth straight monthly rise and its 12‑month rate at +3.5% (stage 1 +3.7%), the pipeline is warming where it matters most for near‑term final demand.

Energy’s Mirage: Goods Strength Without Breadth

Final demand goods surged +0.9% m/m, the largest gain since February 2024. But breadth is missing: goods excluding food and energy rose just +0.2%; foods were 0.0%.

Energy did the heavy lifting at +4.6%, with gasoline accounting for more than half of the goods increase (gasoline itself +10.5%). Upstream, diesel fuel leapt +12.4% at the processed‑intermediate level and natural gas rose +10.8% at the unprocessed level. Electric power and jet fuel also advanced. Offsets existed—residual fuels -8.6%, and some chemicals soft—but not enough to change the structure of the move: this was an energy print, not a broad goods inflation print.

Core Deceleration? Blame the Margin Ghosts

Core final demand less foods, energy, and trade cooled to +0.2% m/m from +0.7% in October. The 12‑month pace, however, is +3.5%, the largest since March—hardly a picture of vanishing pressure.

The flat services headline (0.0% m/m) was entirely a trade‑margins story: margin declines of -0.8% in trade services overwhelmed +0.3% gains in both non‑trade services and transportation/warehousing. Within intermediate services, notable increases included management consulting +4.2% and bundled wired telecom +4.6%, along with multiple wholesaling categories. Business loans dropped -4.5%, offering some offset. The point: margins, not broad service deflation, explained November’s quiet services headline—and margins are often revised.

Revisions Rewrite the Fall

The 2026-01-14 release flagged revisions from June through October—highly relevant when trade margins drive the story. Two concrete shifts change the perceived slope into autumn:

• August 2025: now -0.2% m/m (was -0.1%)—weaker than initially reported.

• September 2025: now +0.6% m/m (was +0.3%)—stronger than initially reported.

That revision set reframes the momentum from “softening” to “dipping then re‑accelerating,” and it aligns with the current report’s parade of “largest since” superlatives: goods strongest since February 2024; core 12‑month strongest since March; intermediate services 12‑month strongest since March; stage 1 and 4 12‑month rates strongest since February 2023.

Monthly Trajectory and Revisions at a Glance

Note: The latest release cites broad June–October revisions without component detail—critical given trade services volatility.

Industry Pressure Points the Market Should Not Ignore

• Upward pressure building: gasoline +10.5%, diesel fuel (processed‑intermediate) a key driver, utility natural gas +10.8% (unprocessed), jet fuel, electric power, bundled wired telecom +4.6%, management consulting +4.2%, and multiple wholesaling categories.

• Offsets providing partial relief: residual fuels -8.6%, declines in beef/veal and basic organic chemicals, business loans -4.5%, and weaker retail margins for health/beauty/optical goods -4.3%, alongside softer margins in food/alcohol retailing and guestrooms.

One technical nuance: new model‑year vehicles rolled out in October–November with quality adjustments. That can distort month‑to‑month reads in passenger car and light truck series—a caution when interpreting goods ex‑food/energy or any vehicle‑linked move. Also missing: clarity on annual reweighting effects, which can subtly tilt historical comparisons.

What This Means for Markets

• Rates and curves: A benign +0.2% headline with flat services looks bond‑friendly at first glance. The pipeline says otherwise. With stage 4 +0.4% m/m (sixth straight gain) and energy inputs advancing, the risk tilts toward stickier early‑2026 prints. That argues for caution extending duration on “soft services” headlines and favors maintaining some curve steepener exposure if downstream pass‑through lifts near‑term inflation expectations.

• Breakevens and inflation hedges: Goods strength is narrow, but energy‑driven. Breakevens can drift higher if gasoline/diesel pressures persist and bleed into transportation services. Consider selective TIPS exposure, particularly in the 5‑ to 7‑year window, where pipeline heat is most likely to show up.

• Equities:

• Credit: Watch sectors exposed to freight and utilities. Transportation/warehousing costs up +0.3% signal potential margin squeeze in levered logistics and heavy users of power/natural gas. Business loan price declines (-4.5%) improve borrower optics now, but could be transient if service margins rebound.

What to Watch Next

• Gasoline and diesel in December/January PPI and CPI; look for confirmation that November’s energy pulse persisted.

• Trade services revisions: a swingy -0.8% is the anchor of the “services unchanged” story; if revised up, services inflation will look firmer in hindsight.

• Stage‑flow indices: sustainment of stage 4/1 12‑month highs (now +3.5% and +3.7%) would validate pass‑through risk.

• Vehicle quality adjustments: expect noise in auto‑linked goods; assess 3‑month annualized trends rather than month‑to‑month blips.

The Investor Takeaway

The 2026-01-14 release sells calm—headline +0.2% and flat services—but buys it with volatile trade margins and an energy pop that obscures breadth. Under the surface, intermediate inputs are rising, stage‑flow heat is back to early‑2023 highs, and the revision set steepens the inflation slope into autumn. Position for a market that may have to re‑price “stable” once energy and services costs filter forward.

Actionable positioning:
- Keep some inflation protection on: add to 5‑ to 7‑year TIPS or breakeven overlays on dips.
- Favor energy and selective industrials with pass‑through power; underweight retailers vulnerable to a rebound in trade margins.
- In rates, be wary of extending long duration on soft headlines; a measured curve steepener makes sense if pipeline pressure persists.
- For credit, tighten exposure where energy and transport costs are rising and pricing power is thin; prioritize balance sheets with room to absorb input volatility.

The headline is quiet. The pipeline isn’t. If you’re investing on the summary line, you’re trading yesterday’s narrative, not tomorrow’s prints.