Data came in lower than expected, making it more likely that the US Fed will make smaller interest rate hikes.
Prices at the wholesale level in the United States rose 8 percent in October from a year ago, the fourth straight decline and the latest sign that inflation pressures are easing from painfully high levels.
The annual figure is down from 8.4 percent in September. On a monthly basis, the government said Tuesday that its producer price index, which measures costs before they reach consumers, rose 0.2 percent in October from September, the same as in the previous month.
The figures came in lower than economists expected and make it more likely that the US Federal Reserve will increase its benchmark interest rate in smaller increments. It has hiked its short-term rate by three-quarters of a point for four meetings in a row, but economists now increasingly foresee an increase of a half point at its December meeting.
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“The improvement in the October inflation data, if it persists, supports the Fed’s expectation of a step down in the pace of increases going forward,” said Rubeela Farooqi, chief US economist at High Frequency Economics, a forecasting firm.
Most of the monthly increase reflected higher wholesale-level gas prices, which rose 5.7 percent just in October. The cost of new cars fell 1.5 percent last month, which could lead to lower prices at the retail level as well.
Excluding the volatile food and energy categories, core producer prices were unchanged in October from September, the lowest reading in nearly two years. Core prices increased 6.7 percent last month from a year ago, down from a 7.1 percent annual rate in September.
The cost of services, such as hotels, air travel, and healthcare, slipped 0.1 percent in October from September, the first drop since November 2020.
The report follows last week’s better-known consumer price index, which showed that year-over-year inflation cooled to a slower-than-expected 7.7 percent in October, down from 8.2 percent in September. And excluding volatile food and energy costs, that report also said that core prices rose just 0.3 percent in October from the previous month, half the increase of the previous two months.
Those consumer inflation figures boosted stock markets because they suggested that the devastating price spikes of the past 18 months might finally be moderating. The cost of used cars, clothing, and furniture fell, a sign that goods prices are reversing their big price leaps of last year, when supply chain blockages sent inflation soaring.
In recent months, delays at major ports have been cleared, the price of ocean shipping has tumbled and more stores are building larger stockpiles. All those trends suggest that goods prices could continue to decline.