Washington, DC, November 14, 2006--Inflationary pressures eased in October as wholesale energy prices and prices for light trucks dropped. The producer price index fell a sharp 1.6%, which matches a record low set in October 2001, the Labor Department reported Tuesday.
The decline in the PPI pushed the year-over-year rate on finished goods prices to negative 1.6%, the first time it was below zero since September 2002.
The core PPI, which excludes food and energy costs, fell 0.9%, the biggest drop since August 1993.
Economists were expecting the index to fall by 0.5%, while core prices were expected to rise 0.1%.
It's the first back-to-back drop in the PPI since July 2004.
Over the past year, the core rate is up 0.6%.
Further back in the production cycle, crude goods prices fell 10.5% in October. It is the biggest drop since April 2003.
Intermediate goods prices fell 1.1% in October. Intermediate goods prices are up 0.4% over the past 12 months, while crude goods are down 22%.
Excluding food and energy, intermediate prices are up 5.9% in the past 12 months, while crude goods are up 20.1%.
The report is unlikely to change economists' expectations that the Federal Reserve will continue to hold short-term interest rates steady at 5.25%. The market expects the Federal Reserve to cut interest rates by the middle of next year.
In October, energy prices fell 5%, led by a record 9.3% decline in residential natural gas prices.
Food prices fell 0.8%, the biggest drop since May. Light motor trucks fell a record 9.7% in October, while passenger car prices fell 2.3%. Electronic computer prices dropped 3.1%.
