U.S. producer prices sink in September

Producer prices in the USA fell by more than anticipated in the month of September, according to a report released by the Labor Department on Wednesday, with the decrease largely reflecting a steep drop in energy prices. Core wholesale prices are up a scant 0.5% in the last 12 months.

Overall producer prices were down 1.1% in September from a year earlier, the eighth straight 12-month decline.

There was a few sign of stabilization.

The Labor Department says the producer price index, which measures price changes before they reach the consumer, dropped 0.5 per cent last month after being unchanged in August.

Combined with a weak retail sales report for September – up just 0.1 percent – the numbers “confirm that the economy is stuck and deflation pressures are the key risk”, said Steven Ricchiuto of Mizuho Securities.

A lack of inflation contributed to the Federal Reserve’s decision last month to refrain from raising US interest rates.

In September, producer prices for goods were down 1.2%, the sharpest fall since January. Service prices fell 0.4%.

The Labor Department added that excluding the volatile categories of food, energy and trade, core prices slid 0.3% month-on-month, compared with a 0.1% gain in August and forecast for an unchanged reading. The Fed expects inflation to rise in the next year as gas prices and the USA dollar stabilize, but so far there’s little evidence of that. Officials have said they want to be “reasonably confident” inflation will move toward the Fed’s 2% target prior to liftoff.

However, a fall in import prices has ensured that core-PCE inflation will also remain under check.