US wholesale inflation cooled off in October, reversing a three-month trend that had seen the cost of energy push up prices, according to data released Wednesday by the Bureau of Labor Statistics.
The Producer Price Index, which measures the average price changes that businesses pay to suppliers, fell 0.5% on a monthly basis. It’s the largest monthly drop since April 2020, when the rapidly spreading Covid-19 virus caused a sharp economic contraction.
October’s decline also marks a sharp turnabout from the 0.4% monthly jump in September, when food and energy prices raised the cost of goods: Energy prices fell 6.5% in October from the previous month, with gasoline sinking 15.3%, contributing to a 1.4% drop in goods inflation.
On an annual basis, PPI rose 1.3% for the 12 months ended in October, down from a 2.2% yearly increase in September.
Economists expected PPI to inch up 0.1% from September and rise 1.9% from last year, according to Refinitiv estimates.
When stripping out the volatile food and energy categories, core PPI was unchanged for the month, bringing the yearly increase to 2.4%.
PPI is a closely watched inflation gauge since it captures average price shifts before they reach consumers and serves as a potential signal for the prices that consumers ultimately end up paying.
Wednesday’s PPI marks another positive development in the Federal Reserve’s monthslong campaign to rein in high inflation.
On Tuesday, the October Consumer Price Index showed that US consumer prices were unchanged for the month, contributing to a slowdown in the annual inflation rate to 3.2%. It’s the first time CPI held steady on a monthly basis since July 2022 and was the lowest annual rate since March 2021.
“The Fed will welcome the reprieve, after producer prices recorded a 4.9% annualized gain in [the third quarter], and coupled with yesterday’s CPI report, it bolsters the case for no further rate increases,” wrote Matthew Martin, US economist for Oxford Economics.
This story is developing and will be updated.
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