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US wholesale prices dip in April

[WASHINGTON] US producer prices resumed their downward trend in April as the cost of energy fell and a strong dollar kept underlying inflation pressures benign, supporting views that the Federal Reserve will only raise interest rates later in the year.

The Labor Department said on Thursday its producer price index for final demand fell 0.4 per cent last month, declining for the third time this year. The PPI increased 0.2 per cent in March.

In the 12 months through April, producer prices fell 1.3 per cent, the biggest year-on-year decline since 2010, after declining 0.8 per cent in March.

Economists had forecast the PPI rising 0.2 per cent last month and falling 0.8 per cent from a year ago.

A drop of 0.7 per cent in the index for final demand goods accounted for more than 70 per cent of the decline in the PPI last month. Energy prices fell 2.9 per cent after rising 1.5 per cent in March. Food prices fell for a fifth straight month.

The dollar, which has gained about 11 per cent against the currencies of the United States' main trading partners since June, and lower energy prices are keeping inflation subdued.

That, together with signs of a modest rebound in economic growth after a dismal first quarter, suggest the Fed should be in no rush to start tightening monetary policy. Most economists do not expect the US central bank to hike rates before September.

The Fed, which has a 2 per cent inflation target, has kept its key short-term interest rate near zero since Dec 2008.

Last month, the volatile trade services component, which mostly reflects profit margins at retailers and wholesalers, fell 0.8 per cent after slipping 0.2 per cent in the prior month.

A key measure of underlying producer price pressures that excludes food, energy and trade services ticked up 0.1 per cent after rising 0.2 per cent in March.