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Updated: U.S. Producer Prices Fall 0.8% In January, Gasoline Prices Drop Dramatically

By Kitco News
Wednesday February 18, 2015 8:30 AM

Editor's Note: The article was updated to include comments from CIBC. The article was updated a second time to include comments from Capital Economics.

(Kitco News) - Pipeline inflation pressures declined dramatically in January due to lower oil prices, according to the latest data from the U.S. Department of Labor.

Wednesday, the Department of Labor Statistics reported that last month its Producer Price Index fell 0.8% on a seasonally adjusted basis, compared to a fall of 0.3% in December. According to consensus forecasts, economists were expecting the index to fall 0.4%.

According to the report, gasoline prices remain the biggest factor for headline producer price inflation; the gasoline index saw a decline of 24% last month.

The report said producer prices, excluding food, energy and trade, fell 0.3%, following a 0.1% increase in December.

Core prices, which exclude just food and energy, showed a 0.1% fall in January, compared to 03% in December; economists were expecting core prices to rise 0.1%. Economists were expecting core prices to rise 0.1%..

Paul Ashworth, chief U.S. economist at Capital Economics, said the drop in producer price inflation does not mean there is a deflationary risk in the U.S. economy and it won’t keep the Federal Reserve from hiking rates in the second half of the year. He added that the drop in core inflation is the result of a strong U.S. dollar.

“As with the drop in energy prices, however, the impact of the stronger dollar on price inflation will be temporary,” he said. “Given that the Fed is targeting the inflation rate in one or two years' time rather than the current rate, this is not a reason to delay the first interest rate hike, which we expect in June.”

By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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