Producer Prices Fall for Fourth Straight Month in Sign of Low Inflation

The prices that businesses received for goods and services unexpectedly fell in February for the fourth straight month, in a sign that inflation remains extremely low as the economy struggles to return to normal growth.

The producer price index declined 0.5 percent in February, the U.S. Labor Department said Friday.

The drop was an improvement over January’s 0.8 percent plunge. But that decrease — the largest one-month decline since the department revised its methodology in 2009 — was driven by sharply lower oil prices.

Those prices stabilized in February, and economists had expected the producer price index to increase 0.3 percent last month.

But prices for food and other goods and services fell, causing the decline.

The report provided another worrisome signal for Federal Reserve policymakers as they consider if the economy is strong enough to raise interest rates.

Although job growth has improved, Fed officials remain concerned that inflation is running well below the central bank’s annual 2 percent target.

The Fed uses a different inflation measure based on personal consumption expenditures.

But producer prices offer a view of inflation on the wholesale side of the economy. For the 12 months ended Feb. 28, producer prices had declined 0.6 percent. The year-over-year figure had been flat in January.

Much of the recent downward pressure was caused by the steep decline in oil prices that began last year.

In January, the gasoline producer price index fell 24 percent. Prices for energy were down 10.3 percent in January, the seventh straight monthly decline.

But gasoline prices rose 1.5 percent in February, the first increase since June. That helped keep overall energy prices flat.

Food prices, however, fell 1.6 percent, the biggest drop in nearly two years. Prices for trade services were down 1.5 percent, as were transportation and warehousing prices.

Excluding volatile food and energy, producer prices were down 0.1 percent in February after a 0.2 percent drop the previous month.

This article appeared in print in the March 16th, 2015 edition of Hamodia.