0.2 per cent drop in April producer price index
Dip in energy and intermediate goods costs helped to drive down U.S. wholesale prices lower in April, indicating easing of inflationary pressures.
U.S. Bureau of Labor Statistics reported Friday that the producer price index, which measures price changes before they reach retail sector, dropped 0.2 per cent in April, the first such decline after four months and the biggest decline since October.
Wholesale energy prices tumbled 1.7 per cent, accounting for half the drop in energy costs, and a major saver in manufacturing costs.
For 12 months till April end wholesale prices have risen just 1.9 per cent. That's the smallest 12-month change since October 2009 and in line with the Federal Reserve's inflation target.
The prices for finished goods were unchanged in March though they had increased 0.4 per cent in February.
On an unadjusted basis, prices for finished goods advanced 1.9 per cent for the 12 months ended in April, the seventh straight month of slowing year-over-year increases following a 7.0-per cent rise for the 12 months ended September 2011.
At the earlier stages of processing, prices received by manufacturers of intermediate goods decreased 0.5 per cent in April, and the crude goods index moved down 4.4 per cent.
The April decrease in the finished goods index is attributable to a 1.4-per cent decline in prices for finished energy goods, the largest decline since a 1.5-per cent decrease in October 2011. About half of the April drop can be traced to gasoline prices, which fell 1.7 per cent.
Decreases in the indexes for residential natural gas and liquefied petroleum gas also contributed to lower prices for finished energy goods.
By contrast, the indexes for finished goods sans foods and energy, and for finished consumer foods rose 0.2 per cent, the sixth straight increase.
The drop in gas prices is a relief to consumers. Retail gas prices spiked earlier this year but have dropped 5 per cent since peaking in early April.
Nearly a quarter of the April rise is attributable to a 0.4 per cent advance in the index for pharmaceutical preparations. Higher prices for civilian aircraft also were a factor in the increase in the finished core index.
The 0.5 per cent drop in PPI for intermediate materials, supplies, and components is the first decline since December 2011. The April decrease is attributable to prices for intermediate energy goods, which fell 2.7 per cent.
By contrast, the index for intermediate materials without inclusion of foods and energy moved up 0.2 per cent, and prices for intermediate foods and feeds advanced 0.4 per cent.
For the 12 months ended in April, the intermediate goods index advanced 1.1 per cent, the seventh straight month of slowing year-over-year increases following a 10.4-per cent rise for the 12 months ended September 2011.
Prices for intermediate energy goods moved down 2.7 per cent in April, the largest decline since a 3.0 per cent drop in February 2010.
A major factor in the April decrease was the index for diesel fuel, which fell 4.2 per cent. Declines in the indexes for jet fuel and gasoline also contributed significantly to lower intermediate energy goods prices.
Lower wholesale prices and inflation gives the Federal Reserve room to hold interest rates at record-low levels. Last month the Fed reiterated that plans to keep its key interest rate at current levels till at least late 2014. That's not likely to change when the Fed next meets on June 19-20.
Through the first three months of this year, the economy grew at an annual rate of 2.2 per cent, better than last year but slower than the 3 per cent annual growth logged in the October-December quarter.
Source: United States News.Net
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