Producer Prices and Uncertainty Reset Businesses' Supply Chain Priorities

Core Insights - The Producer Price Index (PPI) for final demand increased by 0.5% in January, with a 12-month rise of 2.9%, indicating rising cost pressures in logistics and distribution channels [3][16] - Service margins are rising, particularly in trade, where margins increased by 2.5%, suggesting that distribution layers are absorbing markups despite softening goods inputs [3][16] Supply Chain Risks - Middle-market firms are experiencing pricing volatility amid policy uncertainty, with nearly 30% of CFOs in goods-producing sectors citing high uncertainty [4] - Firms with a higher percentage of overseas suppliers (40% or more) report 33% high uncertainty, compared to 18% for those with only domestic suppliers [5] Cash Flow Management - 85% of U.S. middle-market firms utilize working capital solutions, with index scores rising to an average of 55 in 2025-26, up from 52 the previous year, reflecting improved cash flow visibility [10][11] - Early invoice payments increased to 41% in Canada, up from 34%, indicating a trend towards securing favorable terms and reinforcing supplier relationships [11] Technology Adoption - Adoption of artificial intelligence for working capital efficiency reached 42% across North America, helping firms model demand swings and synchronize payables with receivables [12] - The use of commercial and virtual cards among middle-market firms in Canada rose to 17% in 2025, up from 7% in 2024, streamlining workflows and reducing operational burdens [13][14] Consumer Behavior - As supply chains tighten and prices rise, consumer behavior adjusts, with 45% of millennials using credit card installment plans in the prior three months [15] - Households are smoothing cash flow in response to pricing variability, highlighting the impact of upstream cost volatility on consumer spending [16]