U.S. Wholesale Prices Fall 0.6%

Feb. 16, 2007
Much improved from last month's figures.

In the latest sign of easing inflation pressures, wholesale prices slumped 0.6% in January, the Labor Department said on Feb. 16.

The "core" index of prices excluding food and energy was up 0.2%, in line with forecasts.

The latest figures marked a sharp retreat from the 0.9% jump in December and 1.8% surge in the headline PPI in November, along with increases in the core rate.

The drop in wholesale inflation stemmed from a sharp decline in energy prices, which fell 4.6% in January, the steepest monthly drop since October. Within the sector, gasoline prices plunged 13%, while home heating oil prices fell 8.3%.

Light truck prices fell 1.4% in January and car prices were down 0.1%.

But core PPI was influenced by gains elsewhere. Civilian aircraft prices posted a gain of 1.1%, construction and farm equipment were up 0.7% each, cigarettes had a 1.8% gain, and women's apparel prices advanced 1.6%.

Over the past 12 months, the PPI is up only 0.2% and the core rate up 1.8%, in perhaps a better indication that inflation remains modest.

Economists say the Federal Reserve monitors inflation with an unofficial "comfort zone" of one to two percent for core prices. The Federal Reserve has kept interest rates steady since August while warning that it may tighten monetary policy if inflation picks up. But Fed chairman Ben Bernanke said this week the central bank still expects a moderation of inflation.

Copyright Agence France-Presse, 2007

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