MW: U.S. wholesale prices fall slightly in February
Lower costs of clothing-store margins, gasoline largely account for decline
By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — U.S. producer prices fell in February for the first time in three months in another sign that inflationary pressures remain well contained.
The producer price index dipped 0.1% on a seasonally adjusted basis, the Labor Department said Friday. The price of goods rose 0.4% last month, but the cost of services fell 0.3%.
Economists polled by MarketWatch had expected the PPI to increase by 0.2%, but the index underwent a major overhaul this year for the first time since 1978, and that’s made it more difficult to forecast early on.
The decline last month was largely attributed to lower profit margins for clothing retailers and a 1.1% drop in the cost of gasoline. Yet the wholesale cost of food rose 0.6% and natural gas jumped 4.6% as demand grew during a particularly cold month.
Excluding the volatile categories of food and energy and trade, so-called core producer prices rose 0.1% for the second straight month.
In any case, lower wholesale costs in February show that wholesale inflation is still tame. The PPI has risen just 0.9% over the past 12 months, down from 1.2% in January.
The new PPI formula captures price changes of three-fourths of all U.S. goods and services vs. about one-third of all production under the old method. That’s mainly because of the inclusion of services as retail, finance, education and health care — they now represent a much bigger piece of the economy than goods-producing industries.
The fresh-look PPI also includes a new index that tracks prices of goods and services meant to be sold to consumers. The index, known as personal consumption, rose 0.2% in February, and it’s up a scant 0.9% over the past year. The index is expected to give a heads up if consumer inflation is about to shift up or down.
Sustained increases in wholesale costs eventually translate into higher prices of consumer goods and services, but the relationship is not precise. Companies raise or lower prices for a number of reasons. The true cost to Americans is better seen through the consumer price index, which measures what people actually pay.
The consumer price index, to be released Tuesday, is forecast to rise 0.2% in February but it’s also quite low on an annual basis.
