Producer prices dive in October
Wholesale prices plunged a record amount in October as energy prices fell by the largest amount in 22 years.
The Labor Department reported Tuesday that wholesale prices dropped 2.8% in October, the biggest one-month decline on records that go back more than 60 years. The previous record was a 1.6% fall in October 2001, the month after the terrorist attacks.
The overall decline in the department’s producer price index was bigger than the 1.8% drop analysts had expected. But core inflation, which excludes energy and food, was not as well-behaved, rising a bigger-than-expected 0.4%.
The 0.4% increase in core inflation did not alter the view that plunging energy prices and a sharply slowing economy were combining to slash inflation pressures.
Analysts said much of the jump in core prices reflected the lingering effect of the huge rise in energy costs earlier in the year and should retreat in coming months as those costs continue to fall.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, predicted that core wholesale prices would retreat significantly in coming months.
The 2.8% overall decrease marked the third straight month that wholesale prices have fallen.
The PPI report showed that energy prices dropped 12.8% in October, the biggest one-month decrease since a 14% decline in July 1986.
All types of energy showed big declines, with gasoline falling a record 24.9%, surpassing the old mark of a 22.1% drop in March 1986.
Home heating oil prices were down 9.6%, natural gas intended for home uses fell 5.9%, and liquefied petroleum gas dropped 27.6%, the biggest decline in more than three decades.
Food costs edged down 0.2% last month, as declines in the prices of milk and meats offset a big jump in vegetable prices.
The 0.4% increase in core prices reflected higher costs for light trucks, the category that includes sport utility vehicles. The price of tires, civilian aircraft and malt beverages also were higher, although the cost of passenger cars declined 1.7%.