The wholesale cost of US goods and services fell by the most in more than five years dragged down by energy, data on Thursday showed.
The producer price index fell 0.6 per cent month-on-month in February from the previous month, the labour department said.
That was its biggest such drop since January 2015 and exceeded economists’ expectations for a 0.1 per cent decline. On a year-on-year basis PPI fell 1.3 per cent.
Lower energy prices proved the biggest drag to wholesale inflation as crude prices tumbled 13 per cent last month. The rapidly spreading coronavirus sapped travel demand, disrupted supply chains and triggered fears of a global economic slowdown, which depressed oil prices. The data precede the impact of the Saudi Arabia-led price war.
So-called core US producer prices, which strip out volatile components like food, energy and trade services and are considered a good gauge of underlying inflation, fell 0.1 per cent month-on-month — the first drop since June 2019. Core PPI was up 1.4 per cent a year ago, missing economists’ forecasts.
“Looking ahead, the disinflationary impact from the virus and the historical plunge in oil prices will exert strong downward pressure on prices,” Gregory Daco, economist at Capital, said.
Inflation has thus far continued to undershoot the Federal Reserve’s 2 per cent target. The central bank delivered an emergency 50 basis point rate cut in the wake of the Covid-19 outbreak that has rattled markets and investors expect policymakers to deliver another cut at its meeting next week.
Source: Economy - ft.com
