U.S. Producer Prices Dip 0.1% In November, Matching Economist Estimates

(RTTNews) - With energy prices continuing to fall following a steep drop in the previous month, the Labor Department released a report on Friday showing a modest decrease in producer prices in the month of November.

The Labor Department said its producer price index edged down by 0.1 percent in November following a 0.2 percent drop in October. The modest decrease matched economist estimates.

"Wholesale prices fell for the third straight month on lower energy and motor vehicle costs, showing little pipeline pressure for increased consumer prices," said Jay Morelock, an economist at FTN Financial.

He added, "With crude and intermediate goods falling as well, the Fed will not be concerned with upward price pressure as they head into their meeting next week to consider tapering asset purchases."

The continued drop in producer prices in November was largely due to a 0.4 percent decrease in energy prices, which tumbled by 1.5 percent in October.

Gasoline prices fell by 0.7 percent, while lower prices for diesel fuel and home heating oil also contributed to the drop in energy prices.

Meanwhile, the report said food prices came in unchanged in November after climbing by 0.8 percent in the previous month. The Labor Department said higher prices for pork were offset by lower prices for processed young chickens.

Excluding food and energy prices, the core producer price index inched up by 0.1 percent in November after rising by 0.2 percent in October. The uptick in core prices also matched expectations.

The modest increase in core prices reflected a 0.6 percent increase in prices for light motor trucks as well as higher prices for agricultural machinery and equipment.

Compared to the same month a year ago, producer prices were up by 0.7 percent in November, reflecting an acceleration from a four-year low of 0.3 percent in each of the two previous months.

Core producer prices increased at an annual rate of 1.3 percent in November compared to the 1.4 percent year-over-year growth seen in October.

Paul Dales, Senior U.S. Economist at Capital Economics, said, "The fall in core price inflation, from 1.8% in January to 1.3% now, probably has further to run as the previous drop in import price inflation filters through into selling prices."

"None of this should concern the Fed too much, though, as the stronger economy should start to support core PPI inflation in the second half of next year," he added.

Next Tuesday, the Labor Department is scheduled to release a separate report on consumer price inflation in the month of November.