AFP: US wholesale prices drop 0.4 pct; core rate jumps 0.4 pct
WASHINGTON (AFP) — US wholesale prices fell 0.4 percent in September amid sliding oil prices, but core inflation -- excluding food and energy -- rose 0.4 percent, Labor Department data showed Wednesday.
The producer price index (PPI) showed its second consecutive monthly decline since the start of the year, after a 0.9 percent drop in August.
The headline number was in line with analysts' consensus forecasts, but core PPI rose double market expectations of a 0.2 percent rise.
"On the surface, this report looks worrisome in that excluding energy, producer costs rose. But a look at the details indicates that we may have seen the last of the bad inflation numbers for a while," said Joel Naroff at Naroff Economic Advisors.
Wholesale prices, which jumped 1.2 percent in July when oil hit record peaks above 147 dollars a barrel, have since eased as oil prices have tumbled on concerns about demand in a slowing global economy battered by the financial crisis.
Crude oil slumped below 72 dollars Wednesday, its lowest level in 13 months, as recession fears raised concerns about a prolonged drop in energy demand.
In September, the decline in wholesale energy prices slowed to 2.9 percent from 4.6 percent in August, after rising 3.1 percent in July, the Labor Department data showed.
Gasoline prices fell 0.5 percent, after a 3.5 percent drop in August, and most other energy products saw price declines.
Wholesale food prices climbed 0.2 percent in September, easing from a 0.3 percent rise in August.
"There is a prevailing expectation now that the plunge in oil and other commodity prices, and clear signs of a global economic slowdown, will manifest themselves in the inflation data in coming months," Briefing.com analysts wrote in a client note.
"Weakening demand should keep inflation and inflation expectations in check for the time being," they said.
The Federal Reserve slashed its interest rates by a half percentage point on October 8 in an exceptional coordinated move with other major central banks as Some analysts expect the Fed to cut rates again at its October 28-29 meeting. The federal funds rate is currently pegged at 1.5 percent.
Naroff said the tame PPI report was "good news as the Fed is flooding the economy with liquidity that it will ultimately have to sop up. If, as expected, inflation eases, the back side of this crisis may not be nearly as worrisome as it looks right now."
