Tags: producer prices | ppi | economy | services

Producer Prices Rise as Higher Auto Costs Offset Lower Gasoline

Tuesday, 18 Nov 2014 08:38 AM

Inflation picked up in October due to higher prices that U.S. companies received for new model cars, beef, pork, pharmaceuticals and electric power.

The producer price index increased 0.2 percent in October from the previous month, the Labor Department said Tuesday. The index measures the cost of goods and services before they reach the consumer.

Prices for many products climbed even as wholesale gas costs plummeted 5.8 percent last month. Automakers contributed to inflation by introducing 2015 car models, while beef prices jumped 6 percent and pork prices surged 8.1 percent.

Excluding the volatile categories of food and energy, prices rose 0.4 percent in October.

Ongoing declines in fuel prices have been a benefit for most Americans. Over the past month, average gas prices nationwide have plunged nearly 8 percent to $2.89 a gallon, according to the AAA Daily Fuel Gauge.

Falling energy costs have restricted inflation in the broader economy. Producer rises increased only 1.6 percent in the 12 months ending in September, a rate substantially lower than the Federal Reserve target.

The Fed targets inflation at about 2 percent to protect against deflation, since falling prices could pull down wages and potentially trigger another recession. At the same time, the Fed target is designed to stop inflation from running so high that it could erode the buying power of consumers and businesses, which could also cause a recession.

Limited inflation for producers has also kept costs low for consumers. A separate government measure of consumer prices has risen just 1.7 percent in the 12 months ended in August.

Other economic factors have also eased inflationary pressures insider the United States.

Japan's recession and slowing economies in Europe and China have caused the dollar to rise in value against foreign currencies. When the dollar strengthens, it typically reduces the cost of oil and other commodities that the financial markets price in U.S. currency.

At the same time, few Americans have received meaningful pay hikes.

Average hourly pay for non-supervisory workers has risen just 2.2 percent over the past year to $20.70, the Labor Department reported earlier this month. Because wages are barely rising, consumers are reluctant to increase their spending, which keeps inflation in check.

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Inflation picked up in October due to higher prices that U.S. companies received for new model cars, beef, pork, pharmaceuticals and electric power.
producer prices, ppi, economy, services
366
2014-38-18
Tuesday, 18 Nov 2014 08:38 AM
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