Producer Prices Plunged in January Because of Cheaper Gas and Oil

WASHINGTON (Los Angeles Times/TNS) —

The average prices businesses received for goods and services plunged last month because of sharply cheaper gasoline and other oil products, the Labor Department said Wednesday.

The producer price index declined 0.8 percent in January from the previous month, signaling overall inflation continues to remain low.

The drop was the largest one-month decline since the Labor Department revised its methodology in 2009.

The index had fallen 0.2 percent in both November and December. Economists had expected a 0.5 percent decrease in January.

For the 12-month period ended Jan. 31, producer prices were flat compared with a 1.1 percent increase for the year ended Dec. 31.

January’s decline was fueled in large part by a 24 percent drop in the gasoline index. The index had fallen 13.5 percent in December.

Prices for energy were down 10.3 percent last month, the seventh straight monthly decline.

Food prices fell 1.1 percent in January.

Excluding volatile food and energy costs, producer prices were down 0.2 percent last month after a 0.1 percent increase in December.

Low inflation could lead Federal Reserve policymakers to wait longer to start raising the central bank’s benchmark short-term interest rate.

Fed officials want annual inflation of 2 percent. Various inflation gauges are running well below that level, but Fed policymakers said they expect the downward pressure from oil prices to be short term.

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