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U.S. producer prices fall unexpectedly in October

People shop at a supermarket as rising inflation affects consumer prices in Los Angeles, California, U.S. June 13, 2022. REUTERS/Lucy Nicholson

WASHINGTON, November 15 (Reuters) – Producer prices in the United States recorded their biggest drop in three and a half years in October, in a context of a sharp drop in the cost of gasoline, the latest sign of appeasement inflationary pressures.

The producer price index for final demand fell 0.5% last month, the largest decline since April 2020, the Labor Department’s Bureau of Labor Statistics reported Wednesday. September data was revised downward to show a 0.4% increase in PPI instead of 0.5% as previously reported.

Economists polled by Reuters had forecast a slight rise of 0.1% in the PPI. In the 12 months to October, the PPI increased by 1.3% after increasing by 2.2% in September. The report follows data released Tuesday showing consumer prices were unchanged in October.

Slowing inflation as well as slowing job and wage growth reinforced expectations that the U.S. central bank’s most rapid monetary tightening campaign since the 1980s was over.

Financial markets even anticipate a rate cut next May, according to the CME group’s FedWatch tool. Since March 2022, the Fed has increased its policy rate by 525 basis points to the current range of 5.25% to 5.50%.

Prices of goods fell 1.4% in October, with the 15.3% drop in gasoline prices accounting for more than 80% of the decline. Goods prices increased by 0.8% in September. Food prices fell 0.2%.

Excluding volatile energy and energy components, goods prices increased slightly by 0.1% last month. The prices of these so-called basic goods increased by 0.2% in September. Light truck prices have fallen. Passenger cars and light trucks from new model years were introduced into the data in the October release, following standard practice.

The cost of services remained unchanged after increasing by 0.2%. Airfares increased by 3.1%. The costs of hospital and outpatient care as well as the transport of goods by road have also increased. But portfolio management fees and motel and hotel room prices have fallen.

Airfares, portfolio management fees are some of the elements that go into calculating price indexes for personal consumption expenditures, the inflation measures tracked by the Fed for its 2% target.

The narrower PPI measure, which excludes the food, energy and business services components, rose 0.1% last month after climbing 0.3% in September. The core PPI rose 2.9% year-on-year in October after increasing 3.0% in September.

Report by Lucia Mutikani

Our Standards: The Thomson Reuters Trust Principles.

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