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U.S. wholesale prices fall, inflation still muted

Traders in the two and five year bond options pit of the Chicago Board of Trade.

FRANK POLICH/REUTERS

U.S. producer prices fell in December for the third straight month as food prices declined by the most in over 1 1/2 years, while a measure of underlying prices pointed to minimal inflation pressures in the economy.

The Labor Department said on Tuesday its seasonally adjusted producer price index slipped 0.2 per cent last month.

Economists polled by Reuters had expected prices at farms, factories and refineries to drop 0.1 per cent last month.

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Wholesale prices, excluding volatile food and energy costs, rose a modest 0.1 per cent, in line with analysts' forecasts.

The modest core reading suggests businesses are seeing little growth in price pressures, and reinforces the outlook that modest inflation will give the U.S. Federal Reserve space to continue with easy money policies aimed at propping up the economy.

The decline in overall prices brought 12-month inflation to 1.3 per cent, the lowest level since July.

A drop in food costs drove most of the overall decline in December prices. Wholesale food prices fell 0.9 per cent from November, the sharpest drop since May 2011.

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