By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) -- Lower costs for energy pushed the U.S. producer price index to a drop of 0.6% in February, the Labor Department reported Wednesday.
Analysts surveyed by MarketWatch had predicted a decrease of 0.3% for the month.
Core producer prices, excluding volatile food and energy, rose 0.1%. Economists had been anticipating a decline of 0.1%.
A major contributor to the February advance was the index for passenger cars, which rose 0.5%.
February's decline in the headline PPI was the largest since a fall of 1.2% last July. In January, the PPI rate had jumped 1.4%, while the core rate had risen 0.3%.
Analysts said recent indicators of inflation have been benign. In a policy statement issued Tuesday, the Federal Reserve said that it expected price inflation to remain in a subdued state.
Tame inflation could allow the Fed to be patient in exiting its policy of keeping the benchmark U.S. interest rate near zero. The Fed reiterated in its statement that it believes rates can remain extremely low "for an extended period."
The Fed will also be watching the consumer price index carefully for signs that inflation is heating up. The CPI, which measures inflation at the retail level, is slated to be released on Thursday.
PPI details
For the 12 months through February, producer prices gained 4.4%. This is the fourth straight increase.
During the worst of the recession, producer prices dropped on a year-over-year basis. Factoring out food and energy inputs, those prices have climbed 1.0%.
Meanwhile, the core PPI rate has trended lower since hitting 2.3% last August.
Energy prices fell 2.9% at the wholesale level in February, the Labor Department's data showed. It marked the first drop in four months and the biggest since last July.
Gasoline prices fell 7.4% on the month, while prices declined by 8.1% for diesel fuel and by 5.6% for home heating oil.
Wholesale food prices in February rose 0.4% for the second straight month. Prices for eggs rose 8.5%, the biggest gain since last April, as fresh vegetables increased 5.3%.
Prices for intermediate goods rose 0.1% in February, the slowest pace since September. But with food and energy excluded, prices for intermediate goods gained 0.9% -- the largest change since July 2008.
Prices for crude goods decreased 3.5%, the biggest decline in a year. The index for crude energy materials fell 6.4%, as crude nonfood materials less energy fell 0.6%.
