US wholesale prices down 0.9pc as energy retreats

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WASHINGTON, Sept 13 (AFP): A sharp drop in energy costs pulled wholesale prices down 0.9 per cent in August, the Labor Department reported yesterday in a sign of easing inflation pressures.
The producer price index (PPI) showed its first decline since the start of the year and the sharpest drop since October 2006.
The so-called core index which excludes food an energy-sometimes seen as a better indication of inflation going forward-rose 0.2 per cent for the month.
Analysts had been expecting a 0.5 per cent drop in the headline PPI and a 0.2 per cent rise in the core index.
The drop in PPI came after a sharp 1.2 per cent surge in July and 1.8 per cent in June.
Leading the downturn was energy-with a 4.6 per cent decline in August after rising 3.1 per cent in July.
Over the past 12 months, wholesale prices are up a strong 9.6 per cent, or 3.6 per cent excluding food and energy.
The Federal Reserve, which has been holding interest rates low to support a flagging economy despite inflation concerns, has indicated it expected a moderation of inflation this year.
The Fed at its meeting next Tuesday is likely to hold its base rate steady at 2.0 per cent but some say a sluggish economy and easing inflation pressure may allow the central bank to cut rates again.
"The market is sensing the Fed is possibly going to lower rates as soon as Christmas or earlier," said Cary Leahey, senior economist at Decision Economics.
Sal Guatieri at BMO Capital Markets agreed: "Softer commodity prices, a firmer greenback and weak demand will likely drive producer and consumer inflation lower in the months ahead. This opens the door a crack for renewed Fed easing if the economy takes a turn for the worse."