Wholesale prices fall again
Government report shows producer prices fell for the 4th straight month, sinking 2.2% in November.
NEW YORK (CNNMoney.com) -- Wholesale prices fell considerably in November, as energy prices continued to plummet, according to a key government inflation reading released Friday.
According to the Labor Department, the Producer Price Index for finished goods fell 2.2% last month. That drop was less than the 2.8% decline in October, but greater than the 2% decrease economists surveyed by Briefing.com had forecast.
Prices at the wholesale level have fallen sharply as of late, dragged down by falling energy prices. The index that measures the price of energy goods fell 11.2% in November, following a 12.8% drop in October, which set a 22-year record. Crude oil prices fell 20% in the month.
Food prices, which fell 0.2% in October, were unchanged last month. Commodity prices such as corn and grains have fallen slightly amid slumping demand amid an ongoing recession.
The so-called core PPI, which strips out volatile food and energy prices, rose just 0.1% after a rising 0.4% in the previous month. Economists had forecast a 0.1% rise in that reading.
Economists say low inflation could give the Federal Reserve more wiggle room for lowering interest rates to record lows when it meets next week. The Fed cut its key funds rate to an all-time low of 1% in response to deterioration in global financial system, but those cuts tend to be inflationary.
Falling wholesale prices have dragged down consumer prices, which fell a record 1% in October. That has worried economists about the prospect of deflation - the opposite of inflation.
If prices fall below the cost it takes to produce products, businesses will likely have to cut production and slash payrolls. Rising unemployment would cut demand even further, sending the economy into a vicious circle.
A key inflation reading on the retail level, the Consumer Price Index, is due to be released next week. Economists forecast the report to show a record 1.3% drop in consumer prices in November. 
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