Wholesale Prices in US Were Weaker Than Forecast in October
Wholesale prices in the United States were unexpectedly weak in October as declines in the costs of services offset increases in goods, a sign inflation is struggling to gain traction..
The unchanged reading in the producer-price index from the previous month followed a 0.3% rise in September, a Labor Department report showed Nov. 16. The median forecast of economists surveyed by Bloomberg News called for a 0.3% increase.
A 0.3% drop in services prices was driven by a decline in the cost of securities brokerage, investment advice and related services, according to the report. While Federal Reserve officials are widely anticipated to raise interest rates next month, relatively tame price pressures in the economy may potentially limit any further increases in borrowing costs.
Projections for the monthly change in producer prices ranged from a decline of 0.2% to an advance of 0.6%, according to the Bloomberg survey.
From a year earlier, producer prices rose 0.8%, the fastest gain since December 2014, after a 0.7% increase in the prior 12-month period.
Goods prices were up 0.4% from the previous month. Energy costs rose 2.5% from the prior month for a second straight time, and food prices showed a 0.8% decrease.
Excluding food and energy, wholesale prices dropped 0.2% from the previous month after a 0.2% rise. Those costs were up 1.2% from October 2015.
Excluding volatile components such as food and energy, and also eliminating trade services, producer costs dropped 0.1% after climbing 0.3% the previous month. Some economists prefer this reading because it strips out the most volatile components of PPI. Compared with a year earlier, this core measure rose 1.6% after a 1.5% gain.
One takeaway from the report was the increase in health care prices that are used to calculate the Commerce Department’s consumer spending inflation index, the Fed’s preferred price measure. Those costs rose 0.3% in October from the prior month, before adjusting for seasonal variations.
The producer price gauge is one of three monthly inflation reports released by the Labor Department the week of Nov.14-18. A report Nov. 15 showed prices of U.S. imports rose by the most in four months, led by higher fuel costs. A separate report on consumer prices will be released Nov. 17.
