Producer prices plunged in January because of cheaper gas and oil

The average prices businesses received for goods and services plunged last month because of sharply cheaper gasoline and other oil products, the Labor Department said Wednesday.

The producer price index declined 0.8% in January from the previous month, signaling overall inflation continues to remain low.

The drop was the largest one-month decline since the Labor Department revised its methodology in 2009.

The index had fallen 0.2% in both November and December. Economists had expected a 0.5% decrease in January.

For the 12-month period ended Jan. 31, producer prices were flat compared with a 1.1% increase for the year ended Dec. 31.

January’s decline was fueled in large part by a 24% drop in the gasoline index. The index had fallen 13.5% in December.

Prices for energy were down 10.3% last month, the seventh straight monthly decline.

Food prices fell 1.1% in January.

Excluding volatile food and energy costs, producer prices were down 0.2% last month after a 0.1% increase in December.

Low inflation could lead Federal Reserve policymakers to wait longer to start raising the central bank’s benchmark short-term interest rate.

Fed officials want annual inflation of 2%. Various inflation gauges are running well below that level, but Fed policymakers said they expect the downward pressure from oil prices to be short term.

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