US wholesale inflation brakes to near-zero

WASHINGTON: US wholesale inflation slowed sharply in February, grinding to a near halt in part because of falling food prices as the weak economy sank deeper into recession, government data showed Tuesday.

The Labor Department said its producer price index (PPI) rose a seasonally adjusted 0.1 per cent in February, a brusque slowdown from a 0.8 per cent increase in January that had snapped a five-month streak of falling prices.

Most analysts had expected a much stronger 0.4 per cent PPI rise in February.

On a 12-month basis, PPI was down 1.3 per cent from February 2008.

The data showed a strong downward pull on prices in the pipeline before reaching the consumer. The so-called core PPI, which strips out food and energy prices, rose 0.2 per cent in February.

"The underlying pressure on core PPI is downwards, laggging the collapse in core raw materials prices," said Ian Shepherdson of High Frequency Economics.

Wholesale food prices dropped 1.6 per cent, partly offsetting a rise in energy goods prices of 1.3 per cent that marked a steep slowdown from a 3.7 per cent surge in January.

"More than half of this deceleration can be traced to gasoline prices, which moved up 8.7 per cent in February following a 15.0 per cent jump in the previous month," the Labor Department said.

Capital goods prices rose 0.1 per cent following a 0.5 per cent increase in January. The deceleration included a hefty slowing of civilian aircraft prices, which rose 0.5 per cent after climbing 1.0 per cent the prior month.

The Labor Department is to report its closely watched consumer price index data for February on Wednesday.