Wholesale inflation remained in check in April. New government figures showed that producer prices fell during the month, spurred lower by a continued slide in energy prices. Meanwhile, core prices showed only a slight advance, keeping pressure off the Federal Reserve to change its low-interest rate stance.
The figures were generally in line with what economists had predicted.
The U.S. Labor Department revealed that producer prices dropped 0.7 percent in April compared to the previous month. This followed a decline of 0.6 percent in March and represented the fifth month of declining prices in the last seven.
Core producer prices, which exclude the volatile food and energy sector, edged up by a modest 0.1 percent. This followed a 0.2 percent increase in the previous month.
Producer prices provide a key measure of wholesale inflation. Any core reading of 0.2 percent or below is considered a tame reading. Core producer prices have only ticked above 0.2 percent once in the past year - a 0.5 percent reading last July.
Economists had expected the headline number to drop by 0.7 percent. Core prices were projected to rise by 0.2 percent.
Energy prices fell 2.5 percent in April. This followed a 3.4 percent retreat in the previous month. Energy prices have declined in six of the past seven months.
According to the Labor Department, the decline in energy prices contributed over 80 percent of the decrease in overall prices. Gasoline prices plunged 6 percent, the key cause for the overall slide in energy. There were also lower prices for heating oil and residential electric power.
Food prices declined in April as well. The figure dipped by 0.8 percent in the month, reversing a 0.8 percent advance in March. Food prices have been alternating positive and negative readings since December.
On Thursday, the government will announce figures on consumer prices, giving a look at changes in retail inflation.Going into the report on producer prices, economists had expected the consumer figure to slip by 0.3 percent, with core prices advancing by 0.2 percent.
Policy makers keep a close eye on inflation numbers. The Federal Reserve has followed a strategy over the past several years of keeping interest rates near zero in an attempt to stimulate the economy. However, many experts believe this will eventually lead to increased inflation.
A sustained rise in prices could force the Fed to abandon its low-rate policy before it might otherwise decide to change tack. Signs that inflation remains under control give the central bank cover to continue its stimulative efforts.
For comments and feedback: editorial@rttnews.com