Wholesale prices unexpected showed a notable decrease in March, a government report showed Tuesday, pulled down by a sharp drop in energy prices.
While perhaps stirring some deflation concerns, the statistics indicate that inflation is not a worry for now, despite the large amount of money the Federal Reserve has put into the system.
The U.S. Labor Department said producer prices dropped 1.2 percent in March following a 0.1 percent increase in the previous month. Economists had expected no change in producer prices for the month.
Core prices, a measure that excludes the volatile food and energy sectors, were flat compared with the previous month.
The drop in the headline number came largely as a result of a sharp fall in energy prices, which fell 5.5 percent in March compared to a 1.3 percent increase in February.
Wholesale gasoline prices dropped 13.1 percent, while home heating oil showed a decline of 13.2 percent.
Food prices also declined during the month, falling by 0.7 percent. This followed a 1.6 percent drop during the previous month and a 0.4 percent decline in January.
Long term, many economists are worried that the large amount of stimulus the government has put into the system will cause inflation problems. However, those worries have been put on the back burner as authorities struggle to pull the country out of the recession.
On a short-term basis, there has been some worry about deflation, but the Federal Reserve has said it is committed to doing what is necessary to stimulate the economy and put sufficient liquidity into the financial system.
The Fed has cut its benchmark interest rate to effectively zero percent and has been buying long-term treasury securities in order to pump money into the system.
Information on consumer prices is set to be released on Wednesday. This is even a more closely watched gauge of inflation, as it represents what most people are seeing when they go to buy something.
In other economic news released Tuesday, a separate government report showed that retail sales unexpectedly declined in March, raising fears that the consumer continues to pull back, despite other recent signs that the economy is stabilizing.
The report showed that retail sales fell 1.1 percent in March following a revised 0.3 percent increase in February. Economists had expected sales to increase by 0.3 percent compared to the 0.1 percent decrease originally reported for the previous month.
For comments and feedback: contact email@example.com