The Labor Department reported on Friday that their gauge of producer prices at the wholesale level (PPI) dropped 0.4% during the month of October. The Producer Price Index posted an unexpected decline compared to the 0.2% tick higher Wall Street forecast.
Economists polled by Reuters had forecast the PPI rising 0.2 percent last month and dropping 1.2 percent from a year ago. A key measure of underlying producer price pressures that excludes food, energy and trade services fell 0.1% after declining 0.3% in the month prior. The so-called core PPI was up 0.4% in the 12 months through October.
Excluding the volatile food and energy components, prices declined 0.3%, compared to expectations for a 0.1% increase. U.S. producer prices have dropped now for a second straight month and the cost of services fell, indicating weak inflation pressures that could stifle the Federal Reserve raising interest rates next month.
October also marked the ninth straight 12-month decrease in the index, and services accounted for 70% of the decline in the PPI. Services fell 0.3% after falling 0.4% in September.