It was hot in January. It usually is in the US post-pandemic.

I’m referring to the macro seasonal, not the weather.

Since 2020, the US economy’s prone to a false optic early in the year, when the balance of macro data tends to tip a re-heat, only to reverse course mid-summer to reflect what can be an equally deceptive slowdown optic.

That’s some context for a very warm read on producer prices out of the BLS, which on Friday said a 0.8% month-to-month gain on the services index — the largest since last summer — was attributable to a measure of margins (note the emphasis) which rose 2.5% from December.

As the figure shows, that’s the biggest sequential gain in records going back to 2009, and it suggests some folks were passing along the cost of the Trump administration’s (illegal) tariffs.

Virtually everywhere you looked in Friday’s release there was upward pressure on the margins, so to speak, which were higher for commercial equipment wholesalers, chemicals, purveyors of cosmetics and clothing retailers.

The headline PPI print showed a 0.5% advance, warmer than the 0.3% consensus. That increase was entirely down to services and thereby to the above-mentioned record surge on the metric which measures margins received by wholesalers and retailers.

The final demand goods gauge showed a 0.3% decline from December to January, as the food and energy gauges receded in tandem for a second month. But, the core goods PPI measure (i.e., excluding food and energy) rose 0.7%, the largest monthly gain in more than three years.

Note that the 0.8% increase on the overall services measure was the second consecutive large monthly advance. December’s MoM print showed a 0.7% increase. The trade services gauge rose sharply in December too, which is to say January’s record increase was a dubious, unwanted encore.

Like the services measure, core PPI rose 0.8% in January. That was more than double consensus and the fastest monthly pace in six.

At 3.6%, the YoY pace on the core measure reflected the quickest annual rate since March.

With the (not insignificant) caveat that I’m no expert on this particular math, the read-across from Friday’s PPI update is that the MoM core PCE print for January’s likely to print north of 0.4% and could well round up to 0.5%.

Cutting rates further when core PCE’s rising at (potentially) a 0.5% MoM clip is a suicide mission, again assuming this isn’t all just a false seasonal optic.