Posted originally on Mar 19, 2026 by Martin Armstrong |  

Wholesale prices rose 0.7% in February, more than double expectations and the largest monthly increase since mid-2025. On a year-over-year basis, PPI is now running at 3.4%, the highest level in roughly a year. This is not a sign that inflation has been defeated. It is a clear indication that price pressures are building again at the wholesale level.

What matters here is that PPI is a leading indicator. These are the costs businesses face before anything reaches the consumer. Manufacturers, transport companies, and wholesalers absorb these increases initially, but they do not simply eat those costs. They pass them along. What we are looking at is the early stage of future consumer inflation already forming in the pipeline.

Goods prices jumped 1.1%, the largest increase since 2023, driven by rising food and energy costs. Food prices alone posted sharp gains, with certain categories like vegetables showing significant spikes. Energy also turned higher again, with gasoline and fuel costs rising. Services inflation continues to push higher as well, rising 0.5% for the month. This marks several consecutive months of firm increases, including sharp moves in areas such as lodging. This is not isolated inflation. It is widespread and embedded throughout the system.

The timing is critical. This report does not yet fully reflect the geopolitical escalation that began at the end of February. Since then, oil prices have surged, and energy costs are already moving higher into March. Energy feeds into everything. Transportation becomes more expensive, production costs increase, and ultimately, the price of food rises as distribution costs climb.

This is how inflation returns in waves. It begins at the wholesale level, then moves into consumer prices. Even mainstream economists are now acknowledging that the inflationary impact from rising energy prices and geopolitical tension will begin to show up more clearly in the coming months. That means this report is likely showing the starting point rather than the peak. This is the environment where stagflation takes shape. Costs rise while growth weakens, and policymakers find themselves unable to respond effectively because the source of inflation is no longer monetary policy but geopolitical events.

From a cyclical perspective, this is exactly what we should expect at this stage. As we move through this period, war and geopolitical instability become dominant forces driving economic outcomes. Energy shocks, supply disruptions, and shifting capital flows create volatility that central banks cannot manage. The mistake governments always make is believing they can fine-tune the economy with interest rates. They cannot control geopolitical events, and they cannot prevent the ripple effects that follow rising energy prices.