Wholesale Prices in US Decrease, Led by Plunging Fuel Costs
Wholesale prices in the United States declined in December from the prior month, showing inflation remains well-contained as Federal Reserve officials weigh further increases in the benchmark interest rate.
The 0.2% decrease in the producer-price index followed a 0.3% gain in November, a Labor Department report showed Jan. 15. Over the past 12 months, wholesale prices fell 1%. The PPI excluding volatile food and fuel prices climbed 0.1% from the prior month.
Businesses have grown accustomed to subdued wholesale costs as the plunge in fuel prices and appreciation of the dollar limit cost pressures. Policymakers, who maintain that these effects are transitory amid labor-market progress and broader economic growth, raised the benchmark interest rate in December for the first time since 2006.
“The pressures right now are towards further very low inflation,” Gus Faucher, an economist at PNC Financial Services Group Inc. in Pittsburgh, said before the report. “The assumption is that oil prices will stabilize, the dollar will stabilize and inflation will start to pick up later this year.”
The median estimate in a Bloomberg News survey of 68 economists called for a 0.2% decrease. Projections ranged from a drop of 0.9% to a 0.1% advance.
Goods and services price growth showed more divergence. Prices paid for goods fell 0.7% in December after a 0.1% drop the prior month. Service prices increased 0.1% after a 0.5% jump in November.
Food prices declined 1.3%, the most since February, according to the report. Energy costs slumped 3.4%, led by a 23.4% plunge in diesel fuel that was the biggest since 1990.
Wholesale prices excluding food and energy were forecast to rise 0.1% after a 0.3% increase in November. Those costs were up 0.3% from December 2014.
Excluding food and energy and also eliminating trade services, producer costs advanced 0.2% after rising 0.1% in November. Some economists prefer this reading because it strips out the most volatile components of PPI.
The producer price gauge is one of three monthly inflation reports from the Labor Department. The consumer price index, due for release Jan. 20, showed little change in December, according to the Bloomberg survey median. A report Jan. 14 showed the cost of imported goods declined 1.2% last month, the biggest decrease since August.
