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 The Labor Department said Thursday that the producer price index,
which measures prices before they reach the consumer, dropped 0.2
percent in October. That followed a 0.1 percent decline in
September. The cost of gas plunged 3.8 percent last month, lowering
the index.
Over the past 12 months, energy costs have kept inflation weak.
Prices have increased just 0.3 percent in that stretch.
Excluding volatile energy and food prices, wholesale costs increased
0.2 percent in October and 1.4 percent in the past 12 months. The
continued low level of inflation enables the Federal Reserve to
maintain its unique stimulus measures.
High unemployment and weak wage increases have made it difficult for
businesses to raise prices, both at the wholesale and consumer
levels.
Core wholesale prices were elevated in part last month by a 1.7
percent increase in the cost of new cars. Automakers introduced
their 2014 models in October, which affects prices each year. That
suggests inflation was even lower.
Wholesale food prices also increased last month, primarily because
of higher beef and veal costs. Wholesale prices for bread rolls,
muffins, bagels and croissants rose 4 percent, the biggest
month-over-month increase on records dating back to 1980.
But the steady decline in energy prices has reduced costs across
much of the economy. Gas prices are tumbling because of increased
domestic production, greater political stability in the Middle East,
and less demand from drivers.
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U.S. gas prices began falling in the spring and reached two-year
lows earlier this month. The average price of a gallon of gas was
$3.21 on Wednesday, according to AAA's Daily Fuel Gauge Report.
The Fed has said it will keep the short-term interest rate it
controls at nearly zero at least until the unemployment rate falls
below 6.5 percent, as long as the outlook for inflation stays low.
Low inflation has also allowed the Fed to continuing buying bonds to
try and lower long-term interest rates.
[Associated
Press; JOSH BOAK]
Copyright 2013 The Associated
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