WASHINGTON (AP) — The prices companies receive for their
goods and services fell slightly in February, the latest sign that
inflation is tame.
The producer price index, which measures price
changes before they reach the consumer, dropped 0.1 percent in February,
the Labor Department said Friday. That’s the first decline since
November. A sharp fall in the price markups by wholesalers and retailers
pushed down the index.
Producer prices rose 0.9 percent from 12 months ago. That’s the smallest 12-month increase since last
May.
Wholesale
food and energy prices increased, as did the cost of pharmaceuticals.
Excluding the volatile categories of food, energy and retailer and
wholesaler profit margins, core prices ticked up 0.1 percent.
The
data also reflects the impact of aggressive discounting by clothing and
shoe stores. Their profit margins fell 9.3 percent, the steepest on
record. Gas stations and grocery stores also reduced their markups.
"The
overall takeaway … is that inflation pressures remain quiescent for
the time being," Joseph LaVorgna, an economist at Deutsch Bank, said in a
note to clients.
The figures underscore that inflation remains
largely in check. Businesses have struggled to raise prices because of
historically high levels of unemployment and meager wage growth. That’s
made it harder for consumers to pay more. And with unemployment high,
those with jobs are less able to demand higher pay.
The index was
expanded in January to include services and construction, in addition to
goods. That’s made it a more comprehensive measure.
The government will release its better-known consumer price index on Tuesday.
Low
inflation has enabled the Federal Reserve to pursue extraordinary
stimulus programs to try to boost economic growth. It has kept the
short-term interest rate it controls at nearly zero for more than five
years. It has also been purchasing bonds in an attempt to lower
long-term interest rates to encourage more borrowing and spending.
The
Fed is now trying to unwind some of that stimulus. It has cut its
monthly bond purchases to $65 billion, from $75 billion in January and
$85 billion last year.
Fed policymakers will meet next week and
are expected to announce another $10 billion cut. Employers stepped up
hiring last month, after harsh winter weather cut into job gains in
December and January. Consumers also spent more at retailers in February
after sharp drops in the previous two months.
The figures suggest
the economy may be picking up as the weather improves. That may
encourage the Fed to continue scaling back its stimulus. Still, Fed
policymakers have expressed concern about the persistence of low
inflation. If it remains below target, the Fed could extend its stimulus
efforts.
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