You are here

US producer prices fall on weak trade margins

[WASHINGTON] US producer prices unexpectedly fell in February on weak trade margins, pointing to muted inflation pressures that could argue against an anticipated June interest rate hike from the Federal Reserve.

The Labour Department said on Friday its producer price index for final demand fell 0.5 per cent after dropping 0.8 per cent in January. It was the fourth straight monthly decline in the PPI.

In the 12 months through February, producer prices fell 0.6 per cent, the first drop since the series was revamped in 2009, after being unchanged in January.

Economists polled by Reuters had forecast the PPI rising 0.3 per cent last month and remaining unchanged from a year ago.

The decline in producer inflation came despite a stabilization in energy prices, which had weighed on price pressures in recent months.

The dollar's strength against the currencies of the main US trading partners is helping to keep a lid on inflation.

The low inflation environment could prompt the Fed to hold off on raising interest rates until much later this year, despite a tightening labour market.

The volatile trade services component, which mostly reflects profit margins, fell a record 1.5 per cent in February, after rising 0.5 per cent in January. It was pulled down by a 13.4 per cent drop in margins at gasoline service stations.

A key measure of underlying producer price pressures that excludes food, energy and trade services was unchanged after a record 0.3 per cent drop in January.