Washington – Wholesale inflation, helped by a record plunge in gasoline prices, dropped by the largest amount in more than three years in September. Industrial production was down sharply, too.
The reports Tuesday were viewed as evidence that the slowing economy is lowering inflation pressures – just what the Federal Reserve hoped for.
Wholesale prices fell by 1.3 percent, nearly double the expected decline, as the cost of gasoline sank by 22.2 percent, the biggest drop on record, the Labor Department reported.
Meanwhile, the Federal Reserve said output at the nation’s factories, mines and utilities fell by 0.6 percent, the worst showing since the widespread shutdowns caused by Hurricane Katrina a year ago.
While the overall inflation performance was much better than expected, core inflation, which excludes energy and food, jumped by 0.6 percent in September, the biggest increase in 20 months.
However, the increase in core inflation was heavily influenced by increases in new-car prices, reflecting the end of dealer incentives that had been used to try to sell off a glut of unsold cars.
Excluding the rise in car and truck prices, core inflation would have been up 0.1 percent.
Brian Bethune, U.S. economist at Global Insight, called the overall performance of wholesale prices in September “unequivocally good news” and said it should keep the Federal Reserve on hold next week.
After raising interest rates 17 consecutive times over two years, the Fed has left rates unchanged since August with economists predicting the central bank will likely remain on hold for the rest of the year.
The 0.6 percent fall in industrial production in September was a much bigger decline than the 0.1 percent dip Wall Street had been expecting. It followed no change in August as the nation’s factory sector signaled it was slowing production.
