Wholesale prices in record plunge

Government report shows producer prices fell a larger-than-expected 2.8% in October.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Ben Rooney, CNNMoney.com staff writer

Which should be the Obama administration's priority?
  • Stimulating the economy
  • Reducing the budget deficit

NEW YORK (CNNMoney.com) -- Wholesale prices fell by a record amount in October as energy costs continued to decline, government figures showed Tuesday.

The Labor Department's Producer Price Index (PPI) decreased 2.8% in October, after easing 0.4% in September. It was the sharpest one-month decline on record and much more than the 1.8% decline that economists surveyed by Briefing.com had expected.

The so-called core PPI number, which excludes food and energy prices, rose 0.4% - more than the 0.1% increase analysts had forecast.

"Needless to say this is all about energy prices," said Ian Shepherdson, chief economist at High Frequency Economics.

Energy prices plummeted 12.8% in the month after falling 2.9% in September. It was the largest one-month decline since July 1986 when energy prices fell 14%. That includes a 24.9% drop in gasoline prices, which fell 0.5% a month earlier.

The decline comes as crude oil prices have fallen more than 60% to roughly $55 a barrel since the summer's all-time high above $147 a barrel.

The index for residential natural gas slid 5.9% and prices for home heating oil moved down 9.6% in the month.

Meanwhile, food prices declined 0.2% after climbing for the last 5 months.

The 0.4% increase in core PPI was driven by a sharp 2.6% jump in light truck prices, which include sport utility vehicles, and a 4.1% rise in tire prices. Prices for soaps and detergent rose 1.7%.

Despite the rise in core PPI, many economists say inflation is moderating, which could give the Federal Reserve some leeway when it comes to lowering interest rates.

"The Fed continues to have the green light to ease [monetary] policy," said Anika Khan, an economist at Wachovia Economics Group.

The Federal Reserve cut its benchmark interest rate by a half-percentage point on Oct. 8 and again on Oct. 29 in response to deterioration in global financial system.

"As global economic growth trends downward, wholesale price inflation should be less of a problem in the coming months," Khan said. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Amazing hotel gyms that make working out pure joy 12 of the most awesome hotel gyms around the country where business travelers can recharge More
5 travel spots for the young and curious Millennials like to go off the beaten path when they travel. From Havana to Taipei, here are top travel destinations for young travelers. More
The 5 hottest stocks of 2015 Netflix blew away the rest of the stock market during the first half of the year. Here's a look at the other top stocks of 2015. More
Sponsors