US wholesale inflation eases in the fourth straight decline

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The data was lower than expected, which increased the likelihood that the US Federal Reserve will raise interest rates to a lesser extent.

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Wholesale prices in the United States rose 8 percent in October from a year ago, the fourth consecutive fall and the latest sign that inflationary pressures are easing from painfully high levels.

The annual rate fell from 8.4 percent in September. On a monthly basis, the government said Tuesday its producer price index, which measures costs before they reach consumers, rose 0.2 percent in October from September, in line with the previous month.

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The numbers were lower than economists had expected and raise the likelihood that the US Federal Reserve will raise its benchmark interest rate in smaller increments. It has raised its short-term rate by three-quarters of a point for four consecutive meetings, but now economists are increasingly forecasting a half-point hike at the December meeting.

“The improvement in October inflation data, if sustained, confirms the Fed’s expectation of slower growth going forward,” said Rubila Farooqi, chief US economist at High Frequency Economics, a forecasting firm.

Much of the monthly increase reflected higher wholesale gas prices, which rose 5.7% in October alone. The cost of new cars fell by 1.5% last month, which could also lead to lower prices at the retail level.

With the exception of volatile food and energy categories, core producer prices were unchanged in October from September, the lowest level in nearly two years. Base prices rose 6.7% last month compared to last year, up from 7.1% year on year in September.

The cost of services such as hotels, air travel and healthcare fell 0.1% in October compared to September, the first drop since November 2020.

The report follows last week’s better-known consumer price index, which showed year-on-year inflation eased to a slower-than-expected 7.7% in October from 8.2% in September. And excluding volatile food and energy prices, the report also says that core prices rose by just 0.3 percent in October from the previous month, half the rate in the previous two months.

These consumer inflation figures spurred stock markets on because they suggested that the devastating price spikes of the past 18 months may finally be easing. The cost of used cars, clothes and furniture has fallen, a sign that commodity prices are reversing their big price spike last year when a supply chain lockdown caused inflation to soar.

Delays at major ports have been cleared in recent months, shipping prices have fallen and more stores are stockpiling. All of these trends suggest that commodity prices may continue to decline.

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