Wholesale prices fell 0.5% in December, much more than expected

Wholesale prices dipped 0.5% in December, more than expected

Prices for wholesale goods and services fell sharply in December, providing another sign that inflation, while still high, is beginning to ease.

The producer price index, which measures final demand prices across hundreds of categories, declined 0.5% for the month, the Labor Department reported Wednesday. Economists surveyed by Dow Jones had been looking for a 0.1% decline.

Excluding food and energy, the core PPI measure rose 0.1%, matching the estimate.

A sharp drop in energy prices helped bring the headline inflation reading down for the month. The PPI’s final demand energy index plunged 7.9% on the month. Within that category, wholesale gasoline prices fell 13.4%.

The final demand food index also fell, declining 1.2%.

Inflation readings ahead could be less certain, though, as the cost for a gallon of gas is up about 21 cents from this time last month, and crude oil prices are up about 1.6% so far in January.

Still, the general trend in inflation has been slightly lower. The consumer price index decreased 0.1% in December, though it was still up 6.5% from a year ago – 5.7% excluding food and energy. CPI gauges the prices that consumers pay at the marketplace, while PPI measures what business pay for goods and services.

The declining prices were reflected in another economic report released Wednesday.

Retail sales fell 1.1% in December, slightly more than the 1% forecast. Those numbers are not adjusted for inflation, so the latest reading reflects both receding inflation and tepid consumer demand during the holiday shopping season.

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