Falling energy prices ease concerns over inflation

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Wholesale prices in the United States fell for the first time this year in April as energy prices tumbled, the government said Friday in a report that eased concerns about inflation.

The Labor Department said its producer price index (PPI) fell 0.2 percent due to a large 1.4 percent drop in energy prices that offset a 0.2 percent rise in food prices.

Excluding energy and food prices, the so-called “core” PPI rose 0.2 percent.

Most analysts expected the overall PPI for finished goods would remain unchanged for the second straight month, after a 0.4 percent rise in February, while core PPI matched expectations.

On a 12-month basis, prices for intermediate goods received by manufacturers dropped 0.5 percent in April.

And prices of crude goods, at the start of the wholesale pipeline, dived 4.4 percent from April 2011, the sharpest decline since February 2009 when the United States was mired in the global downturn.

Ian Shepherdson, chief US economist at High Frequency Economics, said the plunge in core materials prices was a positive sign for the modest US economic recovery under way.

“There is no inflation threat in this report beyond a temporary pass-through from recent gains in core finished-goods prices,” he said.

On a 12-month basis, overall PPI rose for a seventh straight month in April, by 1.9 percent, the smallest increase since October 2009, the Labor Department reported.

Steven Ricchiuto at Mizuho Securities said the wholesale numbers suggested consumer prices fell in April.

“These data points imply that the CPI data due out early next week will come in on the favorable side of expectations,” he said.

[Customers pump gas into their cars in California. AFP Photo/Justin Sullivan]