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U.S. producer prices drop more than expected

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Christian Fernsby ▼ | March 13, 2020
Partly reflecting a steep drop in energy prices, the Labor Department released a report yesterday showing U.S. producer prices declined by much more than expected in the month of February.
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The Labor Department said its producer price index for final demand slid by 0.6 percent in February after climbing by 0.5 percent in January. Economists had expected the index to edge down by 0.1 percent.

Topics: U.S.

The bigger than expected decrease in producer prices came as energy prices plummeted by 3.6 percent in February after falling by 0.7 percent in January, with a 6.5 percent nosedive in gasoline prices leading the way lower.

Food prices also showed a significant decrease, plunging by 1.6 percent in February after inching up by 0.2 percent in the previous month.

However, the report also showed an unexpected decrease in core producer prices, which exclude food and energy prices.

Core producer prices fell by 0.3 percent in February following a 0.5 percent increase in January, while economists had expected core prices to inch up by 0.1 percent.

The unexpected drop in core prices came as prices for services declined by 0.3 percent in February after climbing by 0.7 percent in January.

The Labor Department said over 70 percent of the broad-based decrease can be traced to a 0.7 percent pullback in prices for trade services, which jumped by 1.2 percent in the previous month.

Prices for transportation and warehousing services also slid by 0.6 percent in February after plunging by 1.6 percent in January, while prices for other services edged down by 0.1 percent after rising by 0.6 percent.

With the bigger than expected monthly decrease, the annual rate of producer price growth tumbled to 1.3 percent in February from 2.1 percent in January.

Core producer prices in February were up by 1.4 percent compared to the same month a year ago, reflecting a deceleration from the 1.7 percent growth in the previous month.