PPI Off 0.6%

Washington, DC, February 16, 2007--Wholesale prices fell in January on a drop in energy prices, while core prices increased modestly, the Labor Department reported Friday.

Wholesale energy prices fell 0.6% in January after two sizable gains in November and December.

The core producer price index - which excludes food and energy prices--rose 0.2% in January for the second consecutive month.

The drop in wholesale prices and the gain in the core rate were in line with the expectations of Wall Street economists.

In December, the PPI rose 0.9% and the core rate rose 0.2%.

In the past year, the PPI has risen 0.2% compared with 1.1% last month. The core rate has decelerated to a 1.8% increase in the past 12 months, compared with 2.0% a month ago.

The main factor behind the drop in wholesale prices in January was the sharp decline in energy prices. Gasoline prices fell 13%. Natural gas prices fell 1.9%.

A slew of factors led to the increase in the core rate, including higher prices for drug preparations, civilian aircraft, cigarettes and women's apparel.

Drug preparations rose 1.3%, the biggest gain since May while civilian aircraft prices rose 1.1%, the biggest gain since November.

At the same time, prices for light motor trucks fell 1.4% and passenger car prices fell a slim 0.1% in the month.

Prices of intermediate goods fell 0.7% on a 3.8% drop in energy prices. Prices of crude goods fell 6.3% as energy costs fell 16.2%.

Excluding food and energy, intermediate prices rose 0.1% and core crude prices rose 1.1%.

The basic industrial materials index rose 1.6% in January after a 0.5% gain in the previous month.