The November PPI report doesn’t look dramatic. Headline final demand prices rose 0.2
month over month. If you stop there, it’s easy to conclude inflation is contained and the system is behaving.

But that headline hides where the pressure actually is.

What’s Driving The Number

Most of the move came from goods prices, which jumped 0.9% the biggest monthly increase in nearly two years. A large chunk of that was energy. Final demand energy prices rose 4.6%, with gasoline up more than 10% in a single month. That alone explains a meaningful share of the headline increase.

Meanwhile, services prices were flat. That divergence matters. It tells you this wasn’t broad based pricing power across the economy. it was a cost shock hitting specific inputs.

Strip out food, energy, and trade services, and core PPI was up 0.2% on the month and 3.5% year over year. That’s still elevated, but it’s not accelerating. It’s steady pressure, not runaway inflation.

Margins Are Getting Squeezed

The most important part of this report isn’t the headline. It’s trade services.

Wholesale and retail margins fell 0.8% in November, the largest drop since April. That means businesses weren’t able to pass higher costs through cleanly. They absorbed them.

This is how stress usually shows up before it hits growth or jobs. Not through collapsing demand, but through thinner margins. Companies discount. They compete harder. They protect volume instead of profit.

You can have inflation still running around 3% year over year and still have an economy that’s quietly losing pricing power.

Upstream vs. Downstream Tells the Same Story

Intermediate demand prices rose 0.3%, with processed goods up 0.6% and unprocessed goods up 0.4%. Energy again did most of the work. On a year over year basis, the earliest stage of production is still running hot..Stage 1 prices are up 3.7%, the fastest pace since early 2023.

That means costs are still moving through the pipeline.

But downstream, margins are narrowing. That gap of rising inputs, contested pricing is classic late cycle behavior.

What This Is (And Isn’t)

Producer prices are still rising year over year. Demand hasn’t collapsed. But it’s also not confirming a clean disinflation narrative.

Instead, it shows an economy where…

• input costs can still spike suddenly,
• consumers are more price sensitive,
• and businesses are absorbing volatility rather than passing it on.

That’s not a healthy expansion phase. It’s a balancing act.

My View

The PPI isn’t telling you inflation is back. It’s telling you inflation is uneven, and the burden of adjustment is shifting onto corporate margins.

That’s usually how the cycle turns. Not with a crash in prices, but with companies losing room to maneuver. When margins compress long enough, hiring slows, capex gets cautious, and growth cools without a headline moment.

This print looks calm on the surface. Underneath, it’s signaling an economy that’s still under pressure..just in subtler, more uncomfortable ways.