Washington, DC, Dec. 13--Wholesale prices dropped 0.4% in November, the biggest decline in six months. The sizable drop in the Producer Price Index, which measures prices of goods before they reach consumers, came after wholesale prices jumped 1.1% in October, according to the Labor Department.
The latest snapshot of prices at the wholesale level surprised analysts, who expected prices to be flat.
Falling wholesale prices, assuming they show up in lower retail prices, are one of the few benefits for consumers of a weak economy. But businesses whose product prices are going down can feel even more pressure on already strained profit margins.
The 0.4% decline in the PPI in November from the previous month matched a drop in wholesale prices registered in May.
Much of the overall drop in wholesale prices reflected a 1.8% drop in energy prices, as tension receded about supply disruptions that could come from a possible war with Iraq. Those concerns were a factor in driving energy prices up by 4.2% in October.
Gasoline prices went down by 9% in November and heating oil fell 11.1%, the biggest decline since last December.
Excluding volatile energy and food prices, which can swing widely from month to month, core wholesale prices fell by 0.3% in November from the previous month. The decline, which came after a 0.5% increase, also marked a better performance in core wholesale prices than the flat reading analysts were forecasting.
Car prices dropped 3.6% in November, the biggest decline since October 2001.
Costs for sporting goods fell by a record 3.1% last month, exceeding the previous record drop of 2.2% in November 1992. Telephone equipment prices went down 1.4% in November, the largest decline since April 2001.
Food prices rose 0.3% in November, down from a 0.7% increase in October.
In another report, the Commerce Department said businesses boosted inventories by 0.2% in October from the previous month, a sign that businesses were betting that there would be demand for their products. The increase in inventories was accompanied by a 0.4% rise in businesses' sales in October.
In September, business inventories rose by 0.6% as sales slid by 0.7%.
