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U.S. wholesale prices fell
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December 13, 2001: 10:58 a.m. ET
Producer price index down 0.6 percent, "core" rate up 0.2 percent.
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NEW YORK (CNN/Money) - Wholesale prices fell in November, the government said Thursday, showing inflation remains in check as a sluggish world economy helped keep the price of energy imports low.
The Producer Price Index -- a measure of prices at the wholesale level -- fell 0.6 percent after a record 1.6 percent drop the previous month, the Labor Department said. The drop in prices was larger than Wall Street forecasts of 0.4 percent.
"PPI was very well behaved due to energy, though there was a rebound in car prices. Aside from that, the trend is soft in terms of prices. That confirms weakness in economic activity," said Jade Zelnik, chief economist for Greenwich Capital Markets.
Excluding often volatile food and energy prices, the so-called core PPI rose 0.2 percent after falling 0.5 percent in October. Analysts were expecting the core rate to fall 0.5 percent.
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PPI was very well behaved due to energy, though there was a rebound in car prices. Aside from that, the trend is soft in terms of prices. That confirms weakness in economic activity.
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Jade Zelnik, chief economist for Greenwich Capital Markets |
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The November decline was led by another big drop in energy prices, which offset rising prices for autos and tobacco.
Tobacco product prices, which were flat in October, rose 1.8 percent. Passenger car prices posted a gain of 0.9 percent following a 4.7 percent drop in October when shoppers rushed to take advantage of low-interest financing deals.
Gasoline prices fell another 10.3 percent and prices for heating oil registered a 7.4 percent decline. Oil prices have dropped over $10 a barrel since mid-September as the slower economy has dampened demand.
The report provided yet more evidence that the Federal Reserve does not need to worry about inflation when cutting interest rates.
The U.S. central bank has said it does not see inflation as an imminent problem for the U.S. economy. In a statement released on Tuesday, when it cut interest rates for the 11th time this year to 1.75 percent from 2.00 percent, the Fed said, "Economic activity remains soft, with underlying inflation likely to edge lower from relatively modest levels."
Analysts said this wording indicates that risks of stoking inflationary pressures with easy money will not stand in the way of further Fed rate cuts if they prove needed to revive an economy in its ninth month of recession.
Separately, the Commerce Department said retail sales fell a record 3.7 percent last month after October's big jump, which was fueled by low-interest loan incentives offered by automakers. Auto sales account for about a quarter of all retail sales. 
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