Upon interpreting last night's PPI data, it appears to have skyrocketed across the board, but a closer look reveals that it is almost entirely driven by the service industry.

To be more specific, over half of the increase in the growth rate comes from the profit margins of final demand trade services, which jumped directly by 2.0% in a single month.

Many people's first reaction is 'driven by tariffs', but that is not the case—this indicator is highly volatile, mainly reflecting the combination of wholesale selling prices vs. retail purchasing prices.

As long as one of these prices rises and the other falls, the marginal price can surge significantly within a month.

For example, if a grocery retailer purchases at $1.00 per bottle, and the wholesale price remains unchanged at $0.90, but the retail price only increases by $0.05, the year-on-year marginal price will directly soar by 50%.

Therefore, if we exclude the 'PPI trade services' segment, the direct impact of tariffs on final demand goods, excluding food and energy, is actually just 0.4%, much milder than the market perceives.