The US Department of Labor revealed on Wednesday that wholesale prices in the United States saw a notable decline last month. The Producer Price Index (PPI), a key indicator of inflation before it reaches consumers, experienced a 0.5% drop in October compared to September. This marks the first decline since May and stands as the most substantial decrease since April 2020.
On a year-over-year basis, prices witnessed a modest 1.3% increase, a notable drop from the 2.2% recorded in September and the smallest gain since July 2021. Excluding the influence of volatile food and energy costs, the “core” consumer prices remained steady from September to October and rose by 2.4% compared to the previous year. The year-over-year increase in core producer prices was the smallest since January 2021.
The wholesale price of goods experienced a significant 1.4% decline from September to October, driven primarily by a substantial 15.3% drop in the price of gasoline. Conversely, service prices remained unchanged during this period.
This recent alleviation of inflationary pressure follows a year and a half of heightened interest rates, initiated by the Federal Reserve (Fed) in response to escalating inflation. Having raised its benchmark interest rate 11 times between March 2022 and July 2023, the Fed’s proactive approach appeared to have a notable impact on inflation. The year-over-year wholesale inflation rate has steadily decreased since reaching a peak of 11.7% in March 2022.
The Labor Department’s report on Tuesday revealed that the Consumer Price Index (CPI) remained unchanged from September to October, with a 3.2% increase from the previous year—the smallest year-over-year rise since June. With the Fed refraining from further rate hikes since July, many economists speculate that the rate-hike campaign may have concluded.
Commenting on the recent decline in producer prices, Matthew Martin of Oxford Economics stated, “The Fed will welcome the reprieve… and coupled with yesterday’s CPI report, it bolsters the case for no further rate increases.” Despite the backdrop of higher interest rates, the US economy and job market have demonstrated resilience. The convergence of a robust economy and a deceleration in inflation has sparked optimism that the Fed may achieve a so-called “soft landing”—adjusting rates sufficiently to curb inflation without triggering an economic downturn.
As the nation awaits further economic indicators, the recent decline in wholesale prices offers a glimpse of hope for consumers and policymakers alike, suggesting a potential stabilization in the US economic landscape.
Source: AP News
