US wholesale prices drop for fourth straight month

Wholesale prices declined further in February for a fourth month straight. The drop was mainly due to a decline in food prices, even as oil prices bounced back a bit – increasing gasoline costs.

The Labor Department announced on Friday that its producer price index dropped by 0.5 percent in February – after a 0.8 percent decline in January.

food

Wholesale prices fell for a fourth consecutive month, reflecting cheaper food

Food costs dropped by 1.6 percent last month (the most since April 2013), while energy costs were flat as electric power and gas declines offset the gain in gasoline.

Core producer prices, which exclude volatile food and energy costs, slid by 0.5 percent month-over-month.

Market analysts expect the producer price index to increase in March.

The surprise drop in PPI last month February caused US producers to warn about reduced margins.

With the dollar continuing to rise versus other major currencies some are concerned that it will reduce the competitiveness of American products in markets overseas.

 

Fed wants inflation to go up to its target zone but “it’s just not happening”

The Federal Reserve is waiting for signs that inflation will move back up toward their target. For the first time since 2006 the Fed is now considering raising interest rates, but the timing has to be right.

Robert Brusca, president of Fact & Opinion Economics in New York, told Bloomberg:

“Inflation is very much controlled in this environment, and we have a rising dollar that’s going to put downward pressure,”

“The Fed very much wants to get inflation up into its target zone so that it can be more comfortable with where policy is, but it’s just not happening.”

The majority of economists expect the Fed to start raising rates by June 2015 at the earliest.