Wholesale Prices Fall Off A Cliff
U.S. wholesale prices plunged at the sharpest rate on record in October as a slowing global economy lowered prices for imported energy and domestic carmakers offered cut-rate financing to lure buyers after the Sept. 11 terror attacks.
The Labor Department said the Producer Price Index -- a measure of costs at the factory door and farm gate -- dropped a steeper-than-expected 1.6 percent last month, a big reversal from back-to-back gains of 0.4 percent registered in August and September.
The decrease in prices in October sharply exceeded Wall Street economists' forecasts for a 0.4 percent fall and was the biggest slide for any month since the government began keeping records in 1947.
Excluding food and energy products, the so-called core rate of wholesale prices declined 0.5 percent in October -- the sharpest since a 1.2 percent fall in August 1993 -- after a 0.3 percent increase in September.
|
Analysts said any risk of inflation likely has disappeared for the next few quarters, but cautioned it might be too soon to talk about an extended period of price declines.
"I don't think we should jump the gun and start arguing about the risk of deflation yet," said economist Anthony Karydakis of Banc One Capital markets in Chicago.
"I think it is important to realize that PPI in particular is a lot more volatile than the CPI (consumer price index) of the inflation measures and is a lot more prone to producing these surprises."
The October CPI figures, which are taken as a proxy for inflation, will not be issued until next Friday.
Inflation at the consumer level has also been lower than last year bunot as subdued as wholesale prices. Consumer prices through September were rising at an annual rate of 2.8 percent, down from an increase for all of 2000 of 3.4 percent.
Nearly every category of goods was cheaper at the wholesale level in October, but the fall in energy prices was striking.
Gasoline prices plummeted 21.2 percent last month, more than taking back the strong gains of 6.3 percent in September and 8.7 percent in August.
That was the biggest drop in gasoline prices since a 22.1 percent decline in March 1986, and stemmed from the cheaper cost of imported crude oil as waning global demand has forced overseas producers to slash their prices.
In the automobile category, with the U.S. economy reeling after the Sept. 11 attacks, automakers offered zero-percent financing to woo shocked consumers. New-car prices dropped 4.7 percent in October after rising 1.3 percent in September -- the biggest price decline since a 5.2 percent fall in October 1972.
© MMI, CBS Worldwide Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press and Reuters Limited contributed to this report