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Wednesday, 13 May 2020 08:00 pm

U.S. producer prices fell by most since 2009

U.S. producer prices fell by the most since 2009 in April, leading to the largest annual decline in nearly 4-1/2 years, which could bolster some economists’ predictions for a brief period of deflation as the novel coronavirus depresses demand.

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The Labor Department said on Wednesday its producer price index for final demand tumbled 1.3% last month, the biggest decline since the series was revamped in December 2009, after slipping 0.2% in March. In the 12 months through April, the PPI decreased 1.2%. That was the biggest drop since November 2015 and followed a 0.7% increase in March.

Economists polled by Reuters had forecast the PPI falling 0.5% in April and declining 0.2% on a year-on-year basis.

The report followed data on Tuesday showing consumer prices dropping by the most since the 2007-09 Great Recession, and a measure of underlying inflation posting a record decline. Lockdowns to slow the spread of COVID-19 have weighed on demand, with the economy contracting in the first quarter at its sharpest pace since the final three months of 2008.

Deflation, a decline in the general price level, is harmful during a recession as consumers and businesses may delay purchases in anticipation of lower prices, worsening the economic downturn.

Excluding the volatile food, energy and trade services components, producer prices plunged 0.9% in April, the biggest drop since the introduction of the series in September 2013. The so-called core PPI fell 0.2% in March and has now declined for three straight months. In the 12 months through April, the core PPI decreased 0.3%. That was the first 12-month drop in core PPI and followed a 1.0% increase in March.

The Fed tracks the core personal consumption expenditures (PCE) price index for its 2% inflation target. The core PCE price index increased 1.7% year-on-year in March after rising 1.8% in February. April’s core PCE price index data will be released at the end of the month.

In April, wholesale energy prices collapsed 19.0% after tumbling 6.7% in March. They were depressed by a 56.6% dive in gasoline prices, the largest decrease since the series began in February 1947. That followed a 16.8% drop in March.

Gasoline accounted for two-thirds of the decrease in the cost of goods last month. Goods prices fell 3.3% in April, the largest decline since the series was revamped in December 2009, after declining 1.0% in the prior month. Wholesale food prices dropped 0.5% last month after being unchanged in March.

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Tags United States Economy COVID-19 crisis Great Recession Deflation

Neha Pandey

Aware of her elements, Neha writes the best articles across industries including electronics & semiconductors, automotive & transportation and food & beverages. Being from the finance background she has the ability to understand the dynamics of every industry and analyze the news updates to form insightful articles. Neha is an energetic person interested in music, travel, and entertainment. Since past 5 years, she written extensively on sectors like technology, finance and healthcare.


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