WASHINGTON (3/16/15)--The producer price index dropped by 0.5% in February, perhaps further dragging down hope for inflation growth in the short term, according to data released Friday by the Bureau of Labor Statistics (Economy.com March 13).
The drop in producer prices marks the fourth straight month that prices have slipped, and pushes prices down 0.7% on annual basis. In December, prices had climbed 1% annually, according to Moody's.
"Producer prices dropped again in February, as broad-based weakness dragged on the index," said Andrew Davis, Moody's analyst (Economy.com). "Food prices plunged for the third consecutive month, dragging on final demand for goods, while declines in trade and transportation/warehousing weighed on final demand for services."
The energy index, which includes oil prices, was unchanged after plummeting by 10.3% the month prior. This ends a seven-month streak of monthly declines.
Food prices dropped by 1.6, and both trade and transportation/warehousing fell by 1.5%.
The core producer price index, which excludes energy and food, fell by 0.5%, leaving prices 1% higher than their year-ago levels but well below the Federal Reserve's target rate of 2%.
"The risks of sustained disinflation have increased in recent months and are more concerning than higher inflation," Davis said. "The Federal Reserve has mentioned these concerns, likely leading policymakers to take a patient approach when normalizing interest rates."