Producer price index fell 1.9% in December
Finished goods continue their decline from August 2008
By Maria Varmazis -- Purchasing, 1/15/2009 4:09:00 PM
The Bureau of Labor Statistics today reported that the December producer price index fell by 1.9%, close to analyst forecasts of a 2% fall for the month. Though slightly less than the October and November declines of 2.8% and 2.2% respectively, the December PPI was still the fifth consecutive month of decline.
Energy price declines moderated from their double-digit falls the previous two months, but still fell by 9.3% in December. "In 2008, finished goods prices fell 0.9% compared with a 6.2% advance in 2007," writes the Labor Department in its report. "The 2008 downturn is mostly attributable to energy prices, which dropped 20.3% after rising 17.8% a year earlier."
Aaron Smith, senior economist for Moody’s, writes that the index’s cumulative drop of 24.3% over the past three months, in addition to yesterday’s news of falling import and export prices, is adding to anxiety about possible deflation in the market. “After stripping out the volatile light vehicle sector, core inflation continued to moderate,”says Smith. “[This is] a trend that is likely to continue given severe weakness in economic conditions and the rapid fall in prices at earlier stages of production.”
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