BLBG:Producer Prices in U.S. Decrease for First Time in Four Months
Wholesale prices in the U.S. fell in April for the first time in four months, led by a decline in fuel costs that signals inflation may cool.
The producer price index dropped 0.2 percent after no change in March, Labor Department figures showed today in Washington. Economists projected the gauge would be unchanged in April, according to the median estimate in a Bloomberg News survey. The 1.9 percent increase over the past 12 months was the smallest since October 2009.
Falling raw-material costs mean companies will have less incentive to charge customers more. Slowing inflation would underscore views of some Federal Reserve policy makers who have said higher fuel prices will have only a temporary effect, allowing the central bank to stick to its plan to keep interest rates low at least until late 2014.
“Tamer producer prices and modest wage growth point to subdued consumer price inflation ahead,” Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, said before the report.
Estimates for the producer price index of the 73 economists surveyed by Bloomberg ranged from a decrease of 0.6 percent to an increase of 0.3 percent.
So-called core prices, which exclude food and fuel, rose 0.2 percent in April, matching the median forecast of economists surveyed, after climbing 0.3 percent the prior month, today’s report showed. About a quarter of the increase in April was attributable to pharmaceuticals, the report said.
Core Cools
The core index advanced 2.7 percent over the past year, the smallest 12-month gain since August.
Fuel expenses dropped 1.4 percent last month, the biggest decrease since October, while food costs climbed 0.2 percent.
Oil prices have kept retreating after reaching the highest level this year. Brent oil for May delivery has dropped 11 percent through yesterday’s close from a peak of $126.22 a barrel on March 13.
Fed Chairman Ben S. Bernanke said on April 25 that a rise in gasoline prices “has created a temporary bulge” in inflation that’s likely to “pass through the system.”
Cheaper agriculture and materials may reduce pressure on companies to raise prices on American consumers facing an 8.1 percent unemployment rate. The Thomson Reuters/Jeffries CRB commodity index was 294.83 yesterday, down 9.5 percent from a five-month high reached Feb. 24.
Commodity Costs
That decline has helped food companies like Sara Lee Corp. (SLE)
“We are currently not anticipating any significant commodity inflation,” Mark Garvey, chief financial officer at the Downers Grove, Illinois-based firm, said on a May 3 earnings call.
The cost of intermediate goods dropped 0.5 percent, the most since October, reflecting the drop in energy expenses, today’s report showed. Crude prices decreased 4.4 percent, a decline last exceeded in February 2009.
Producer prices are one of three monthly inflation gauges reported by the Labor Department. The cost of goods imported into the U.S. fell 0.5 percent last month, reflecting lower costs for fuel. The consumer-price index is due May 15.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
