Wholesale Prices in U.S. Fell in October for a Second Month

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An employee reaches for a case of Diageo Plc1's Smirnoff brand vodka in a distribution warehouse in Bolingbrook, Illinois, U.S. Close

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Photographer: Daniel Acker/Bloomberg

An employee reaches for a case of Diageo Plc1's Smirnoff brand vodka in a distribution warehouse in Bolingbrook, Illinois, U.S.

Wholesale prices in the U.S. fell in October for a second month, reflecting cheaper energy costs.

The 0.2 percent drop in the producer-price index followed a 0.1 percent decline the prior month, a Labor Department report showed today in Washington. The decrease matched the median estimate in a Bloomberg survey of 75 economists. The so-called core measure, which excludes food and energy, increased 0.2 percent as the cost of cars jumped by the most in four years.

Weaker overseas markets such as Europe are limiting demand for commodities including fuel, keeping a lid on prices within the production chain. The lack of inflationary pressures indicates Federal Reserve policy makers have room to maintain their $85 billion-a-month asset program to spur growth.

“Inflation’s clearly low, but I don’t think it’s getting any lower from here,” said Omair Sharif, a U.S. economist for RBS Securities in Stamford, Connecticut. As the U.S. economy improves, inflation will be in “ a real slow, gradual drift upwards.”

Estimates for the wholesale prices in the Bloomberg survey ranged from a drop of 0.4 percent to a gain of 0.3 percent.

Another report today showed applications for unemployment benefits declined to the lowest level in almost two months, showing further healing in the labor market.

Jobless claims in the week ended Nov. 16 dropped by 21,000 to 323,000, the fewest since the week ended Sept. 28, from a revised 344,000 the previous week, the Labor Department said. The median forecast of 47 economists surveyed by Bloomberg called for a drop to 335,000.

Shares Climb

Stock-index futures held earlier gains after the reports. The contract on the Standard & Poor’s 500 Index maturing in December rose 0.2 percent to 1,783.4 at 8:57 a.m. in New York.

Core wholesale prices were projected to rise 0.1 percent for a second month, the survey median showed. Last month’s gain was led by a 1.7 percent jump in the cost of passenger cars, the biggest since October 2009, which reflected the changeover to 2014 models.

Compared with the same month a year earlier, companies paid 0.3 percent more for goods, matching the prior month’s year-to-year gain as the smallest since October 2009. The core index increased 1.4 percent in the 12 months ended in October, following a 1.2 percent gain.

Fuel Costs

Energy costs dropped 1.5 percent from the prior month, the most since April. The price of gasoline fell 3.8 percent.

The cost of finished consumer foods increased 0.8 percent, the most since March. The increase was broad-based as costs for beef and veal, baked goods and vegetables all climbed.

Expenses for intermediate goods decreased 0.4 percent, and those for crude goods dropped 0.9 percent.

Global growth will struggle to accelerate as emerging-market economies including India and Brazil cool, according to the Organization for Economic Cooperation and Development. The world economy will probably expand 2.7 percent this year and 3.6 percent next year, instead of the 3.6 percent and 5.8 percent predicted in May, the Paris-based OECD said in a semi-annual report this month.

W.W. Grainger Inc., the largest U.S. industrial supplies distributor, is among companies that project few price pressures in the year ahead.

“Next year we expect to be in a lower inflation environment,” Jim Ryan, chief executive officer, said on a Nov. 13 earnings conference call. “So not as much pricing inflation next year as we saw this year.”

Producer prices are one of three monthly inflation gauges from the Labor Department. The cost of living index, the broadest of the three measures, dropped 0.1 percent, the first decline in six months, as prices fell for energy, apparel and new cars, figures showed yesterday.

-- With assistance from Chris Middleton in Washington. Editor: Carlos Torres

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

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

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