Wholesale Prices in U.S. Fell More Than Forecast in November

Wholesale prices in the U.S. fell more than forecast in November, reflecting the biggest drop in the cost of energy since March 2009.

The producer price index declined 0.8 percent last month, the most since May, after falling 0.2 percent in October, the Labor Department reported today in Washington. The median estimate in a Bloomberg survey of 74 economists called for a 0.5 percent decrease. The core measure, which excludes volatile food and energy, increased 0.1 percent after falling 0.2 percent.

Cooling global economies along with a lack of fiscal clarity in the U.S. that’s slowed corporate demand are keeping a lid on inflation. With price pressure limited, Federal Reserve policy makers yesterday said they would expand monetary stimulus aimed at spurring growth and reducing unemployment.

“Inflation is not an issue,” Neil Dutta, U.S. economist at Renaissance Macro Research LLC in New York, said before the report. “If you look at wage growth, it’s still very weak. If you look at lending, it’s also still very weak.”

Economists’ estimates for producer prices ranged from a decline of 1 percent to an increase of 0.2 percent. Core wholesale prices were projected to rise 0.1 percent, the Bloomberg survey showed.

Other reports today showed a decline in jobless claims last week to the lowest level since Oct. 6 and a rebound in retail sales in November.

Compared with the same month a year ago, companies paid 1.5 percent more for goods, after a 2.3 percent year-over-year rise in October. The core index increased 2.2 percent in the 12 months ended in November following a 2.3 percent gain.

Cheaper Fuel

Wholesale fuel costs slumped 4.6 percent from the prior month. Diesel prices were down 11 percent and gasoline dropped 10.1 percent, the biggest decreases since March 2009.

The cost of finished consumer foods climbed 1.3 percent.

Expenses for intermediate goods decreased 1.2 percent, also the most since March 2009, and those for crude goods rose 0.1 percent in November.

The cost of passenger cars climbed 0.5 percent and light trucks advanced 0.2 percent. Prices for railroad cars and parts jumped 3.8 percent in November, the most since December 2004.

The Fed yesterday for the first time also linked the outlook for its main interest rate to unemployment and inflation. Rates will stay low “at least as long” as the jobless rate remains above 6.5 percent and if inflation is projected to be no more than 2.5 percent, the Federal Open Market Committee said in a statement.

Fed’s Bernanke

“Longer-term inflation expectations continue to be well anchored,” Federal Reserve Chairman Ben S. Bernanke said at a press conference.

Producer prices are one of three monthly inflation gauges reported by the Labor Department. Import prices dropped in November for the first time in four months on cheaper crude oil and business equipment.

The cost of living index, the broadest of the three measures, fell in November for the first time since May, according the Bloomberg survey before tomorrow’s figures.

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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