12 April 2013 16:18 [Source: ICIS news]
WASHINGTON (ICIS)--Prices for US manufactured goods at the wholesale level fell by 0.6% in March, the Department of Labor (DOL) said on Friday, with the decline almost wholly attributed to a 6.8% drop in producer prices for gasoline.
In its monthly report on costs at the wholesale level, also known as producer prices, the department said that prices for energy products overall dropped by 3.4% in March from February, the largest decline since a 3.5% fall in February 2010.
Most of the drop in wholesale energy product prices was laid to the 6.8% decline in gasoline, which the department said accounted for 80% of the March downturn in energy products pricing.
Lower prices for diesel fuel and home heating oil also were factors in the energy products' overall decline, the department said.
The 0.6% decline in the March producer price index (PPI) followed two months of gains, with January’s 0.2% advance and a sharper 0.7% gain in February.
Those PPI increases had ended a three-month run of lower wholesale prices in the last quarter of 2012.
Because fuel and food costs can fluctuate widely each month, economists look to the so-called core index of producer prices, minus the influence of energy and food products.
The department said the core index in March rose by 0.2%, a repeat of the gains reported in the core index for January and February.
In addition, the department said that the 0.2% gain in the core index last month was in large part attributed to a 0.7% increase in producer prices for civilian aircraft.
Minus the influence of energy, food and aircraft prices, the cost of goods at the wholesale level appears to have been nearly flat in March from February. This suggests that there will be little pressure for price increases at the retail level in this month or the next.
That, in turn, is important, because any sharp rise in inflation at the retail level over a multi-month period could pressure officials at the Federal Reserve Board to raise interest rates to head off the potential for runaway inflation.
However, the US central bank has stated that it likely would keep its current record-low federal funds interest rate of 0%-0.25% in place until the US unemployment rate falls to 6.5% or lower - and annual inflation stays at or below 2%.
The latest US jobless figures show the nation’s unemployment rate fell to 7.6% in March from 7.7% in February.
Despite the Fed's pledge for long-term low interest rates, top financial officers at major US manufacturing firms expect interest rates to begin edging up by the middle of this year.
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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