Wholesale prices decline

U.S.
wholesale prices in February posted their biggest drop in seven months as
gasoline costs fell sharply, leaving scope for the Federal Reserve to keep
short-term interest rates at a record low.

The
producer price index for finished goods dropped by a seasonally adjusted 0.6 per cent on
the month in February, the Labour Department said, following an
unrevised 1.4 per cent increase in January.

The
core PPI, which excludes volatile energy and food prices and is more closely
watched by the Fed, rose 0.1 per cent last month after increasing by 0.3 per cent
in January.

Economists
polled by Dow Jones Newswires were expecting wholesale prices to decline by a
more moderate 0.3 per cent last month. Core producer prices were seen
rising 0.1 per cent.

Fed
officials ended a meeting of their latest policy committee noting the U.S.
economy is improving, but signalled that it will be at least several
more months before they raise short-term interest rates. They repeated that
inflation is likely to remain subdued for “some time.”

The
report showed that for the 12 months ended February 2010, the unadjusted
producer price index rose by 4.4 per cent, moderating from a 4.6 per cent annual
increase in January.

On
a monthly basis, which is adjusted for seasonality, energy prices fell by 2.9 per cent in
February, the biggest drop since July 2009. About 90
per cent of the
decline can be attributed to the gasoline index, which fell by 7.4 per cent.

Food
prices rose by a monthly 0.4 per cent in February, the same increase as
the previous month, led by higher fresh and dry vegetable prices.

The
producer price report showed that prices of raw materials, known as crude
goods, fell by 3.5 per cent on the month in February. That was the largest
decline since February 2009. Intermediate goods prices edged up by 0.1 per cent.

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