U.S. producer prices fell in December
Producer-price index dropped 0.2 per cent in December from month earlier
WASHINGTON— A gauge of U.S. business prices fell in December, another signal of moderating inflation.
The producer-price index, a measure of the prices businesses receive for their goods and services, decreased a seasonally adjusted 0.2% in December from a month earlier, the Labor Department said Tuesday.
Though a steep drop in energy prices held down overall inflation, the bulk of evidence points to a broader softening in price pressures. When excluding the often-volatile food and energy categories, prices were down 0.1% in December from the prior month, while prices excluding food, energy and the volatile trade-services category were flat.
Taken together with other inflation readings, including the Fed’s preferred measure, the personal-consumption-expen- ditures index, inflation has offered no signs of accelerating in recent months.
Moderating inflation isn’t enough to stop the Federal Reserve from raising interest rates, but other data suggestive of a global slowdown, such as weakening manufacturing numbers, help build the case for the Fed’s wait-and-see approach to rate rises, wrote Mi- chael Pearce, U.S. economist at Capital Economics, in a note to clients.
“With the global outlook still gloomy, the case for Fed ‘patience’ is building,” Mr. Pearce said.
From a year earlier, overall prices climbed 2.5% in December, down from a recent peak of 3.4% growth in July.
Sarah House, senior economist at Wells Fargo, said faltering demand for new orders and market volatility could dampen companies’ optimism about whether they can pass along price increases.
“While you still have a lot of businesses looking to raise prices, it doesn’t look like you’re going to see businesses quite as willing (to raise prices) as they were six to 12 months ago,” Ms. House said.
The producer-price measure usually follows the same trends as other broad inflation gauges, though it does not always translate into what consumers pay.
The Labor Department’s consumer-price index remained tame, according to Friday’s report.
Muted inflation diminishes the odds the Fed will raise interest rates any time soon.
Fed officials last month raised their benchmark rate by a quarter percentage point to a range between 2.25% and 2.50% and penciled in two increases this year, assuming the economy would grow about 1.9%, the annual rate they see as likely over the long run.
Federal Reserve vice chairman Richard Clarida reiterated Monday the Fed can take its time raising short-term interest rates this year.
Last week, he had said, “With inflation muted, I believe that the (Fed’s rate-setting) committee can afford to be patient as we see how the data evolve in 2019.”