* Producer prices fall 0.2 percent in April
* Drop in energy costs drags index into negative territory
By Jason Lange
WASHINGTON, May 11 (Reuters) – U.S. producer prices
unexpectedly fell in April as energy costs dropped by the most
in six months, a sign of easing inflation pressures that could
give the Federal Reserve more room to help the economy should
growth weaken.
The Labor Department said on Friday its seasonally adjusted
producer price index dropped 0.2 percent last month. That was
the first drop of the year and the biggest decline since
October.
“Looking ahead consumer prices should remain contained,”
said Michelle Meyer, an economist at Bank of America Merrill
Lynch in New York. “The Fed shouldn’t be worried about
inflation.”
Economists polled by Reuters had expected prices at farms,
factories and refineries to be flat last month.
A rise in gasoline prices last year pinched consumers and
fueled higher inflation, but the Fed has maintained that the
spike would be temporary. A report on consumer prices due next
week is expected to give further signs that inflation is ebbing.
Still, the annual inflation rate targeted by the Fed
continues to hover around the central bank’s 2 percent goal, and
Friday’s price data did not appear to change investor’s views on
the outlook for monetary policy.
Futures for U.S. stocks held at lower levels, depressed by a
revelation from JPMorgan that it suffered a trading loss of at
least $2 billion. U.S. Treasury yields fell as uncertainty over
Greece’s political future underpinned demand for safe-haven
debt.
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Instant view – U.S. producer prices drop:
Graphic – Producer prices unexpectedly fall:
http://link.reuters.com/pep28s
Table – April PPI falls 0.2 pct:
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A number of Fed officials appear loath to take further
action to help the economy, with some arguing the central bank
needs to get ready to being withdrawing its extraordinary
stimulus. The Fed has maintained since January that it expects
economic conditions to warrant holding overnight interest rates
near zero through at least late 2014.
The report on producer prices for April showed wholesale
prices 1.9 percent higher in April than a year earlier, the
weakest reading since October 2009.
The drop in PPI was due to a 1.4 percent decline in energy
prices, the biggest drop since October. Gasoline costs slumped
1.7 percent while prices also fell for residential natural gas
and liquefied petroleum gas.
Wholesale prices excluding volatile food and energy costs
rose in line with economist’ expectations, up 0.2 percent after
March’s 0.3 percent gain.
Fueling gains in the core index, wholesale pharmaceuticals
prices gained 0.4 percent. Higher prices for civilian aircraft
also pushed up core prices.
In the 12 months to April, core producer prices increased
2.7 percent after rising 2.9 percent the previous month. April’s
reading was the lowest since August and just below analysts’
expectations.
(Additional reporting by Richard Leong in New York; Editing by
Andrea Ricci)
