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US Producer Prices Fall for Third Consecutive Month

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US Producer Prices Fall for Third Consecutive Month

Wholesale prices in the United States fell for a third consecutive month in November, as lower energy costs and weak global demand keep prices in-check.

The Producer Price Index, which captures price changes in US primary markets, declined 0.1 percent in November following a 0.2 percent decline the prior month, according to the Labor Department. Producer inflation slowed to 0.7 percent on an annualized basis. The core measure, which excludes food and energy, advanced 0.1 percent. A median estimate of economists surveyed by Bloomberg forecasted no change over the previous month.

The price of intermediate goods declined 0.5 percent in November, while crude goods fell 2.6 percent, official data showed. Energy costs, which declined 0.4 percent, were the biggest factor behind the monthly drop. Food prices remained flat despite large swings in the price of pork and dairy. Costs for agricultural machinery increased at a rate of 1 percent, the most in four years.

“Inflation remains quite tame,” said Jim O’Sullivan of High Frequency Economics Ltd. “Over the course of the next year, the core numbers will drift up a little bit as the economy remains healthy and unemployment keeps falling.”

The gradual decline of producer prices may compel the Federal Reserve to maintain the $85 billion monthly pace of asset purchases. Stronger-than-forecasted jobs growth over the last two months has raised expectations the Fed could initiate a bond taper next week when the FOMC meets for the final time in 2013. Around one-third of economists surveyed by Bloomberg believe the Fed could shift its stance on record stimulus by next week.

Inflation has been “fairly modest” in 2013, according to Bloomberg’s Vince Morales. The inflationary environment is likely to remain consistent in 2014.

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