Wholesale prices fall 0.6 percent
Prices at the wholesale level plunged in February by the largest amount in seven months as a big drop in energy prices offset higher food costs.
The Labor Department said Wednesday that wholesale inflation dropped 0.6 percent, much larger than the 0.2 percent decline economists expected. Excluding food and energy, prices edged up a slight 0.1 percent, in line with expectations.
The deep recession and weak economic rebound are keeping inflation at bay and giving the Fed leeway to maintain record low rates in an effort to build momentum from stronger economic growth.
While overall wholesale prices have risen 4.4 percent over the past 12 months, core inflation, which excludes energy and food, is up a much more subdued 1 percent over the past year.
Economists said they expect inflation pressures to ease even more in coming months because many of the dampening effects on inflation from the steep recession have yet to be felt guaranteed high risk personal loans.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said he expected the 12-month rate for core wholesale prices to dip from the current 1 percent to below zero in coming months.
The 0.6 percent fall in Labor’s Producer Price Index in February was the biggest decline since a 1.2 percent drop last July. In January, wholesale prices surged by 1.4 percent, driven by rising energy costs. Last month, energy prices plunged by 2.9 percent with most of that decline reflecting a 7.4 percent drop in gasoline costs.
However, gasoline pump prices have resumed rising over the past few weeks and now stand at a national average of $2.79 according to automotive club AAA’s daily fuel gauge. That is up from $2.62 a month ago and $1.91 a year ago.