By Canadian Press

US wholesale prices rise 0.1 pct., a sign inflation in check

Dec 11, 2018 | 6:21 AM

WASHINGTON — U.S. wholesale prices barely rose last month as a sharp decline in the cost of gas offset pricier freight trucking services and mobile phone plans.

The Labor Department said Tuesday that the producer price index — which tracks cost changes before they reach the consumer — increased 0.1 per cent in November from the previous month. That’s down sharply from a 0.6 per cent gain in October. Wholesale prices rose 2.5 per cent from a year ago, the smallest annual increase this year.

Excluding the volatile food and energy categories, core wholesale prices rose 0.3 per cent in October and 2.7 per cent from a year earlier. A second measure of core prices, which also excludes wholesale and retail profit margins, rose 2.8 per cent from a year ago, down from a recent peak of 3 per cent in July.

“With pipeline inflationary pressures moderating, we think there is little risk of core consumer price inflation rising further over the coming year or so,” said Michael Pearce, an economist at Capital Economics.

The figures suggest inflation pressures have subsided since late last year. That could affect the Federal Reserve’s deliberations on how quickly to lift short-term interest rates in 2019. Fed policymakers are expected to hike rates for the fourth time this year at their next meeting later this month. But the pace of rate increases next year is uncertain as recent speeches by some Fed officials have hinted that the central bank could take a more wait-and- see approach

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Consumer prices rose 2.5 per cent in October, the government said last month. Excluding food and energy, they rose 2.1 per cent.

The Fed’s preferred measure of inflation, tracked by the Commerce Department, increased 2 per cent in October from a year earlier. Excluding food and energy, that gauge increased just 1.8 per cent from 12 months ago.

That’s just above the Fed’s target of 2 per cent. The Fed seeks to keep inflation at that level to avoid rapidly rising prices but also to prevent a destabilizing bout of deflation, which lowers prices but also wages and can make it much harder to repay debts.

Wholesale gas prices fell 14 per cent last month, the steepest fall since February 2016. That is a function of lower oil prices, which have plunged from $75 a barrel in early October to $51.70 on Tuesday. The sharp fall has prompted the oil cartel OPEC to plan production cuts to boost prices.

Lower wholesale prices could bring more relief at the pump for consumers. The average price for a gallon of gas nationwide fell 29 cents from a month ago to $2.41 Tuesday.

Christopher Rugaber, The Associated Press