1 second ago 2009-11-12T20:27:43-08:00
WASHINGTON (AFP) – US wholesale prices fell 0.6 percent amid a sharp drop in energy costs, the government said Tuesday in a report showing a lack of inflation pressures.
The Labor Department said its producer price index reflected a 2.4 percent drop in energy costs, which accounted for 90 percent of the overall decline.
On a year-over-year basis, prices were down 4.8 percent.
The drop in prices is a mixed blessing for the economy. It allows the Federal Reserve to keep rates low to help lift the economy out of its slump, but also suggests potentially crippling deflationary spiral that can harm recovery efforts.
The so-called core PPI excluding food and energy fell 0.1 percent in the month.
Analysts had been expecting a flat reading for both the headline and core indexes.
Patrick O'Hare at Briefing.com said that "the negative monthly rates will feed into deflation fears" although consumer prices have held firmer.
But Mark McMullen at Moody's Economy.com said a close reading suggests the latest figures "are providing very little support for analysts who fear deflation."
"Excluding food and energy, core inflation among finished producer goods has remained remarkably steady at its long-run trend rate throughout 2009," he added.
"The slight decline in core prices in September was largely due to a drop in ever-volatile vehicle prices."
