Wholesale Prices Drop on Energy
Wholesale prices in the U.S. fell more than forecast in November, led by the biggest drop in energy costs in more than a year, signaling inflation pressures remain weak even as the world’s largest economy is expanding.
The 0.2% decrease in the producer-price index followed a 0.2% advance in the prior month, a Labor Department report showed.
The median forecast of 75 economists surveyed by Bloomberg News called for a 0.1% decline. Costs were up 1.4% over the past 12 months, the smallest year-to-year gain since February.
Oil at a five-year low and slowing overseas markets will subdue prices in the production chain that feed into the cost of living.
“Pipeline inflation pressures are weakening,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who correctly projected the drop in costs. “The weakness isn’t too surprising given the sharp drop in energy prices, and the stronger dollar is exerting downward pressure. We are going to see PPI stay low.”
Projections in the Bloomberg survey ranged from a drop of 0.4% to an advance of 0.1%.
The report showed wholesale prices excluding food and energy were little changed following a 0.4% jump in October. They were forecast to rise 0.1 %. Those costs were up 1.8% from November 2013.
Also taking out trade services, which some economists prefer because it strips out one of the most volatile components of PPI, costs were unchanged last month after a 0.1 October advance.
Energy expenses declined 3.1% in November, the biggest drop since March 2013. Gasoline decreased 6.3%, the most in two years. Food prices fell 0.2%.
West Texas Intermediate oil plummeted below $60 a barrel Dec. 11 for the first time since July 2009 while Brent fell to a five-year low. The Organization of Petroleum Exporting Countries this week cut its forecast for 2015 demand, raising concern over the strength of the global economy and leaving investors contemplating when oil’s collapse will end.
The producer price gauge is one of three monthly inflation reports released by the Labor Department, which also produces the consumer price index and the import cost measure.
