December 29, 2025

Hi, everyone. I hope you’re doing well. This is Taylor St. Germain with ITR Economics. Thanks for joining me on this episode of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence.

And in the spirit of the holiday season, holiday shopping, I wanted to check in on prices, particularly talking about inflation. I wanted to unpack inflation in two different ways. First, looking at the consumer side of inflation and then discussing the producer side of inflation. I’ll also share with you one of my favorite indicators for inflation today and talk about where we’re going.

So I wanted to first highlight the producer side of inflation. Now, when I say the US Producer Price Index, that’s the data series I’m referencing. That is a benchmark of average selling prices of finished goods here in the US. This is one that we focus on a lot with our clients, especially as we’re thinking about pricing strategy or some of the costs that are coming our way. Now, we did see in the most recent data some acceleration in the producer price index growth rate. If you look at the 1/12 growth rate for the producer price index, that is now up 3.3%. That’s a pretty big jump from where we were in the first half of this year. And what it’s highlighting is we’re starting to feel the impacts of some of these higher costs of goods. It’s likely there’s some tariff impact in there. I know earlier in the year, more companies were trying to do their best to eat some of those tariff costs. But when we see the PPI jump like that, it would highlight that we’re really starting to pass some of these costs along. Year-over-year, the Producer Price Index is at 1.8%. By the end of 2026, we expect that number to change from a positive 1.8% to a positive 3.4%. That means your costs are going to increase. That means we’re likely going to see more price increases. It’s just the result of this higher inflation environment.

Now, I’ll remind you all, it’s not just tariffs that have us forecasting that we’re going to see some higher costs in 2026, it’s also labor costs. It’s our fiscal policies with government spending. It’s electricity and power costs. There’s a lot that goes into this. Our big concern with 2026 is not will we grow as an economy, we certainly expect to grow, but it’s can we grow profitably in the face of some of these higher costs? And I think that Producer Price forecast changing from 1.8% where we’re at today to 3.4% next year really shows that we are going to face some more challenges. So really focus on your efficiency and productivity. Have a plan to pass along some of these costs that’ll be coming your way. It’s going to be important for our margins moving forward.

Now, I wanted to touch on the consumer price side, that’s the CPI. As many of you know, the Fed’s more focused on the CPI as it relates to setting their interest rate policy. We did get another interest rate cut in December, but my message is, as we get deeper into 2026 cutting interest rates might be more difficult for this Federal Reserve. Right now, we are forecasting a 4.1% Consumer Price Index number in 2026. Currently, we’re at 2.7% year over year. So just like the PPI, we have consumer inflation also picking up as we move into 2026. As we get later into ’26, especially the back half of ’26, it’s going to be very interesting how at that time our new Fed chair is going to likely handle some of these higher inflation rates. That’s one of the key things I’m watching in 2026 is how does this new incoming Fed chair, as President Trump has announced that he will be appointing a new Fed chair, handle our forecast, which is some higher inflation on the CPI side as we move deeper into ’26.

Now, I wanted to share one of my favorite leading indicators that highlights why we’re forecasting some higher consumer inflation. And it comes back to one of our favorite precious metals, which is gold. We look at the gold quarter over quarter growth rate, which is a 20-month leading indicator to the Consumer Price Index, that consumer inflation. And we have only seen acceleration in gold prices throughout this year. Now, please don’t take anything I’m saying as financial advice. I’m not allowed to give that. I’m just highlighting that this rate-of-change relationship that gold has to the Consumer Price Index has always been a reliable leading indicator for us. Gold prices, with the most recent data that I have, are up 50.1% quarter-over-quarter. And that acceleration highlights that over the next 20 months, we’re going to see some higher inflation come our way.

So the leading indicators are telling us higher inflation. Our forecasts are for higher inflation. That is still my primary challenge that individuals and businesses will be dealing with as we move into 2026. We need to have that plan in place to handle and protect our margins from a price standpoint, but we really need to find ways to recover these higher costs through productivity and efficiency.

I sure hope you found this information helpful. Inflation will be a fun topic in 2026, and we’ll keep you updated there. Thanks for joining me on this episode of TrendsTalk. Please like and subscribe to TrendsTalk wherever you listen to your podcasts. And I look forward to seeing you all in the next one. Happy holidays to everyone. Take care for now.