US Producer Prices Fall Due to Lower Service Costs

U.S. producer prices fell in February, dragged down by falling costs for services and offering little sign of a pickup in inflation pressures.

The Labor Department said on Friday its seasonally adjusted producer price index for final demand dropped 0.1 percent last month.

U.S. inflation has held at a very low level in recent years because of a persistently high unemployment rate. This is expected to push the Federal Reserve to keep its benchmark interest rate near zero for many more months even as the central bank dials back its monetary stimulus.

Prices received by the nation’s factories, retailers and wholesalers had risen 0.2 percent in January.

The renamed index was recently expanded to include services and construction. It was previously known as PPI for finished goods.

PPI now covers about 72 percent of services, which along with other factors will see it likely tracking closely the Consumer Price Index with the passage of time, according to economists.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza