Producer Prices Unexpectedly Fall in February

WASHINGTON, DC - JULY 27: U.S. Federal Reserve Board Chairman Jerome Powell speaks during
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Prices charged by U.S. businesses for goods and services dropped unexpectedly in February, data from the Department of Labor showed, providing some indication that inflation may be cooling.

The producer price index for “final demand”—which measures prices received by U.S. businesses for goods and services sold to their end users in the private sector, government, and abroad—declined by 0.1 percent in February. The index was up 0.3 percent in January, a significant downward revision from the 0.7 percent reported earlier, and it fell 0.2 percent in December.

Compared with a year ago, the producer price index is up 4.6 percent. In January, producer prices were up six percent from a year earlier.

Economists had been expecting prices would climb 0.3 percent from the prior month and 5.4 percent from a year ago. The consumer price index, which measures prices paid by consumers, rose 0.4 percent in February, according to data released Tuesday. The consumer price index includes imports purchased by consumers and is more heavily weighted toward services while the producer price index includes goods exports.

The decline in the final demand was led by a 0.2 percent fall in goods prices. Services prices ticked down 0.1 percent.

The index for core producer prices—which excludes food, energy, and trade services—rose increased 0.2 percent in February, a deceleration from the 0.5 percent recorded in January. For the 12 months ended in February, core producer prices rose 4.4 percent.

Economists had expected the monthly rise to be twice as high, at 0.4 percent. Core consumer prices rose 0.5 percent, the government said Tuesday. That was an acceleration from the 0.4 percent recorded in January.

A 2.2-percent decline in prices for foods was a major contributor to the fall in goods prices. Over 80 percent of the February decline is traceable to a 36.1 percent drop in the price of eggs. Prices of dry and fresh vegetables also fell. Sugar prices and prices of confectionary products rose.

Energy prices fell 0.2 percent. Prices for home heating oil and diesel fuel fell, while gasoline prices increased.

Prices for core goods, a metric that excludes foods and energy, rose 0.3 percent.

The index for services edged down 0.1 percent in February, matching January’s decline. Margins for final demand trade services fell 0.8 percent, leading the services index down. The trade indexes measure changes in margins received by wholesalers and retailers instead of price changes. Prices for transportation and warehousing services fell 1.1 percent. The index for final demand services less trade, transportation, and warehousing advanced 0.3 percent.

The Department of Labor said that a major factor in the February decrease in prices for final demand services was margins for machinery and vehicle wholesaling, which fell 3.9 percent. The measures tracking prices of chemicals and allied products wholesaling, automobiles and automobile parts retailing, guestroom rental, and airline passenger services also declined.

There were increases in prices of outpatient care, food and alcohol retailing, and many financial services.


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