US Wholesale Prices Fall 0.6%, Biggest Decline In Five Years

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.