With wholesale energy prices showing a sharp drop in the month of November, the Labor Department released a report on Thursday showing that producer prices for the month fell by more than economists had anticipated.
The report showed that the Labor Department's producer price index fell by 0.8 percent in November following a 0.2 percent drop in October. Economists had been expecting prices to fall by about 0.5 percent.
The bigger than expected decrease in producer prices was largely due to a sharp drop in energy prices, which tumbled 4.6 percent in November after falling by 0.5 percent in October.
The Labor Department said a 10.1 percent drop in gasoline prices accounted for over ninety percent of the overall drop in energy prices in November.
Meanwhile, the report also showed that food prices rose by 1.3 percent in November after climbing by 0.4 percent in October.
An 8.2 percent jump prices for beef and veal contributed to the increase in food prices along with higher prices for fresh and dry vegetables.
Excluding the sharp drop in energy prices as well as the increase in food prices, the core producer price index edged up by 0.1 percent in November after dipping by 0.2 percent in October. Core prices had been expected to rise by 0.2 percent.
The modest increase in core prices was partly due to higher prices for light motor trucks, which rose by 0.2 percent in November.
Compared to the same month a year ago, producer prices increased 1.5 percent in November, reflecting a notable deceleration from the 2.3 percent annual growth seen in October.
Core prices increased at an annual rate of 2.2 percent in November compared to the 2.1 percent growth seen in the previous month.
Jim O'Sullivan, Chief U.S. Economist at High Frequency Economics, said, "While weakness in the headline data was exaggerated by a plunge in gasoline prices, the underlying trend remains positive but tame. Tomorrow's CPI will likely show a similar pattern."
Friday morning, the Labor Department is due to release a separate report on consumer price inflation in the month of November.
Economists currently expect consumer prices to drop by 0.2 percent in November after edging up by 0.1 percent in October. Core prices are expected to match the 0.2 percent growth seen in the previous month.
by RTT Staff Writer
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