US Wholesale Prices Post Biggest Decline in 5 Years

Measuring price pressures before they reach the consumer, the producer price index's fall followed a 0.5% January rise.

In this Aug. 27, 2013 file photo, workers load large containers of nectarines for sorting at Eastern ProPak Farmers Cooperative in Glassboro, NJ.
In this Aug. 27, 2013 file photo, workers load large containers of nectarines for sorting at Eastern ProPak Farmers Cooperative in Glassboro, NJ.
Associated Press

WASHINGTON (AP) — U.S. wholesale prices fell 0.6% in February, the biggest decline in five years, led by a sharp drop in energy costs.

The Labor Department said the decline in its producer price index, which measures price pressures before they reach the consumer, followed a 0.5% rise in January. It was the sharpest decline since a similar 0.6% drop in January 2015.

Core inflation, which excludes energy and food, was also down in February, dropping 0.3%. Over the past year, producer prices have risen a modest 1.3% and core prices are up just 1.4%.

On Wednesday, the government had reported that consumer prices edged up a slightly 0.1% and are up 2.3% over the past year.

The Federal Reserve seeks to manage monetary policy to hit its target of 2% annual increases in inflation.

The central bank last week slashed its policy interest rate by one-half percentage point, the biggest cut since the 2008 financial crisis. Many economists are looking for another half-point cut when the Fed meets next week, expecting the central bank to provide more protection for the U.S. economy against the adverse effects of the spreading coronavirus.

A major reason the Fed has the leeway to cut interest rates is that inflation has remained a no-show throughout this recovery even as unemployment fell to half-century lows.

For February, energy prices dropped 3.6%, the biggest drop since December 2018, with gasoline prices down 6.5%. Analysts believe there will be further declines in energy prices because of reduced travel from fears about the coronavirus and a production dispute between Saudi Arabia and Russia.

Food prices at the wholesale level dropped 1.6% in February, the biggest decline since a 1.7% drop in February 2015.

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