U.S. producer prices rose more slowly than forecast in October and unexpectedly fell excluding food and energy, a government report showed on Tuesday, pointing to tame inflation pressures.
The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate rose 0.3 percent following a 0.6 percent drop in September.
Analysts polled by Reuters had expected producer prices to increase by 0.5 percent last month. Compared with the same period last year, producer prices were 1.9 percent lower in October, a touch softer than market expectations for a 1.8 percent drop.
Core producer prices, which exclude food and energy costs, unexpectedly dropped 0.6 percent last month -- the largest decline since July 2006 -- after slipping 0.1 percent in September. The core index had been forecast to rise 0.1 percent in October.
When you look at the PPI numbers, inflation remains under control and benign at least for now. The concern is that if you do get a more pronounced economic recovery, what will the impact be? said Lawrence Glazer, managing partner at Mayflower Advisors in Boston.
U.S. stock index futures pared losses on the data, while Treasury debt prices rose, reducing losses.
Excess economic slack following the worst U.S. recession in 70 years has largely suppressed inflation but there are fears that massive efforts by both the government and the Federal Reserve to restore growth could ignite price pressures in the future.
These fears have been exacerbated by the U.S. dollar's sharp depreciation against a basket of currencies.
Federal Reserve Chairman Ben Bernanke said on Monday the U.S. central bank was closely monitoring the dollar's falling value, but added that there were other factors helping to keep inflation in check.
The Fed cut short-term interest rates to near zero in December and has pledged to keep them ultra low for an extended period to support the economy's flagging recovery.
The Labor Department said that gasoline prices rose 1.9 percent last month and were down 16 percent versus a year ago. Finished consumer foods rose 1.6 percent on the month, the largest gain since February 2007, and were down 2.7 percent compared to October last year.
The core producer price index was 0.7 percent higher measured on a year-on-year basis, the slowest increase since March 2004, versus a forecast for a 1.4 percent rise.
The core index excluding cars and light trucks rose 0.1 percent from September. Light motor truck prices fell 5.2 percent in October, the biggest drop since October 2006.
Finished energy goods overall rose 1.6 on the month and were down 9.4 percent over the past year.
Capital equipment prices fell 0.7 percent in October and edged up 0.1 percent over the year. Earlier in the production process, prices received by manufacturers of intermediate goods rose 0.3 percent last month after gaining 0.2 percent the month before.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)