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U.S. Producer Prices Dip 0.2% In October Amid Sharply Lower Energy Prices

USPPI 112113

Producer prices in the U.S. saw another modest decrease in the month of October, the Labor Department revealed in a report on Thursday, with the drop largely due to a steep decline in energy prices.

The Labor Department said its producer price index dipped by 0.2 percent in October after edging down by 0.1 percent in September. The drop by the index matched economist estimates.

The decrease by producer prices was largely due to sharply lower energy prices, which tumbled 1.5 percent in October following a 0.5 percent increase in September.

Gasoline prices plunged by 3.8 percent, while lower prices for diesel fuel and residential natural gas also contributed to the drop in energy prices.

The decrease in energy prices in October was partly offset by a 0.8 percent increase in food prices, which rebounded after falling by 1.0 percent in the previous month.

A 7.5 percent jump in prices for beef and veal contributed to the rebound in food prices along with higher prices for fresh and dry vegetables

Meanwhile, core producer prices, which exclude food and energy prices, rose by 0.2 percent in October after inching up by 0.1 percent in September. Core prices had been expected to tick up by 0.1 percent.

The Labor Department said the increase in core prices was led by a 1.7 percent increase in prices for passenger cars. By contrast, prices for light motor trucks edged down by 0.1 percent.

The report also said producer prices increased at an annual rate of 0.3 percent in October, unchanged from the previous month's four-year low.

Core producer prices were up by 1.4 percent year-over-year in October, reflecting a modest acceleration from the 1.2 percent growth seen in September.

Despite the acceleration, the annual core producer price growth remains well below the Federal Reserve's 2 percent inflation target.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "Again, combined with the benign CPI, these readings give the Fed further license in their eyes to continue their predominant focus of policy on unemployment."

On Wednesday, the Labor Department released a separate report showing tame consumer price inflation in the month of October.

The report said consumer prices increased at an annual rate of 1.0 percent in October, reflecting the slowest annual rate of growth in four years.

Core consumer prices, which exclude food and energy prices, increased at an annual rate of 1.7 percent in October, unchanged from the previous month.

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