Your Economy (No Politics)

[Bullwinkle]

U.S. Feb. PPI falls 1.4%; core rate up 0.3% -
Tuesday, March 21, 2006 1:55:42 PM
http://www.afxpress.com


WASHINGTON (AFX) -- U.S. wholesale prices plunged 1.4% in February, the biggest decline in nearly three years, the Labor Department reported Tuesday

Energy prices fell 4.7%, also the biggest drop since April 2003. Food prices fell 2.7%, the most in four years

Economists expected the PPI to fall about 0.3%

The core producer price index - which excludes food and energy prices - rose 0.3%, stronger than the 0.1% gain expected by Wall Street economists surveyed by MarketWatch. In the past year, the PPI has risen 3.7%, compared with 5.7% last month. The core rate has accelerated to a 1.7% increase in the past 12 months, compared with 1.5% last month The main factor behind the falling wholesale prices was energy. Gasoline prices fell 11%, the most since April 2003, just after the invasion of Iraq. Natural gas prices fell 4.1%, the most since October 2001. Energy prices have risen since the February data were collected

Wholesale energy prices are up 17% in the past 12 months

Finished capital goods prices rose 0.1%. Prices of light trucks rose 0.5%. Prices of construction equipment increased 1.4%

Prices of drugs increased 0.7%

The report is not likely to have much impact on the Federal Reserve's deliberations next Tuesday. Most analysts expect the Federal Open Market Committee to raise overnight lending rates for the 15th straight meeting to stay ahead of inflationary pressures. Last week, the Labor Department reported that consumer prices were well behaved in February, with both headline and core measures rising 0.1%. In the PPI report, prices of intermediate goods fell 0.3% on a 3.1% drop in energy prices. Prices of crude goods fell 9.2% as energy prices plunged 16.2%

However, the PPI report shows continued price pressures on commodities destined for further processing before final sale

Core intermediate goods prices rose 0.5% in February and are now up 4.8% in the past year. Prices of nonferrous metals, chemicals and paperboard rose significantly

Prices of basic industrial materials rose 3.3%. Iron and steel scrap prices increased 7.1%

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