Flat US producer prices point to slight inflation
By Jason Lange, ReutersWASHINGTON--U.S. producer prices were flat in July and pointed to very little inflationary pressure in the economy, which could add to worries at the U.S. Federal Reserve that inflation is running too low.
August 15, 2013, 12:07 am TWN
The Labor Department said on Wednesday a drop in natural gas and gasoline costs held back its seasonally adjusted producer price index. Analysts polled by Reuters had expected a 0.3-percent increase.
But it was the weakness in the index outside of volatile energy and food components that will likely garner more attention at the Fed, which has recently flagged the risks posed to the economy by low inflation.
These so-called “core” prices, which are seen as indicators of trends in inflation, rose 0.1 percent during the month, below the 0.2-percent gain expected by analysts in a Reuters poll.
The report helped push yields lower on long-term U.S. government debt, suggesting investors saw it as a sign the Fed might keep a major economic stimulus program in place for longer.
Inflation has been trending lower for much of the last year despite signs of growing strength in the economy, and the Fed warned last month that low inflation could hurt the economy.
Wednesday's data showed the core index was up 1.2 percent in the 12 months through July, the lowest reading since November 2010. Analysts had expected that reading to fall to 1.4 percent from 1.7 percent in June.