Plunging Gas Drives Wholesale Prices Down by Most in Nearly 3 Years

Plunging Gas Drives Wholesale Prices Down by Most in Nearly 3 YearsBy CHRISTOPHER S. RUGABER

WASHINGTON -- A steep drop in gasoline costs drove down a measure of U.S. wholesale prices in May by the most since July 2009. But outside the food and energy categories, prices increased moderately.

The producer price index fell 1% in May, after dropping 0.2% in April, the Labor Department reported Wednesday. Gasoline prices dropped nearly 9%, the most in almost three years. Food costs also fell.

The index measures price changes before they reach the consumer. Excluding food and energy, the so-called "core" index increased 0.2%, the same as in April.

In the past 12 months, wholesale prices are up only 0.7%, the smallest gain since October 2009. The core index has risen 2.7% in the same period. That's the same pace as last month.

Modest wholesale inflation reduces pressure on manufacturers and retailers to raise prices. That helps keep consumer prices stable, which boosts buying power and drives economic growth. Consumer spending makes up 70% of economic activity.

Mild inflation also gives the Federal Reserve room to hold interest rates at record-low levels and potentially take other steps to boost the economy.

Gas prices have tumbled 40 cents since peaking on April 6. On Tuesday, the average nationally price for a gallon of gas averaged $3.54, according to AAA. That's down 19 cents from a month earlier.

Higher gas and food prices early last year limited Americans' ability to buy other goods. That caused consumer spending, adjusted for inflation, to fall sharply. As a result, the economy barely grew in the first half of 2011.

The economy has picked up since then but is still growing sluggishly. That is keeping a lid on price increases. Slow growth makes it harder for consumers and businesses to pay higher costs. The economy expanded at just a 1.9% annual rate in the January-March quarter.



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Luke Flynn

Maybe the gas prices are "plunging" but coming down from $4.00 to $3.60 is not my idea of "plunging". Going back to what they were under Bush ($1.70) would be a plung. I guess I will become a speculator now. Under Bush when gas went to $1.70 he was a evil oil barren in bed with the big oil compaines. Now that gasoline is more then double under Obama what does that make him???? Or is he just trying to force us into the electric car business. Either way this is his doing and no one elses.

June 14 2012 at 6:13 PM Report abuse +1 rate up rate down Reply
dsh1007155

Do these "writers" work for the oil co's? "Plunging"? Are you kidding? 25 dollars a barrel and 1.25 a gallon are reasonable prices. Anything else is a scam perpetrated by Wall St. "speculators".

June 14 2012 at 3:44 PM Report abuse +1 rate up rate down Reply
TED

Those pesky speculators at it again!!

June 14 2012 at 12:22 PM Report abuse +1 rate up rate down Reply
dt1064

Prices never go below what they were before. Unlike your paycheck prices rise faster than you can make money.

June 14 2012 at 11:48 AM Report abuse +1 rate up rate down Reply
dt1064

IMO gas prices will not drop to the lowest prices the last time they dropped. Around here gas was about $1.80 something before all the speculation started and gas rose to nearly $4.00 a gallon, then price per barrel dropped to what it was before the increase but the price didn't get that low again. Next time the price stayed about 50 cents higher at the lowest point. So don't expect the price to go much below the $3.00 mark this time. Next time it will $3.50 the lowest. Screwing us all the while.

June 14 2012 at 11:46 AM Report abuse rate up rate down Reply
mfg75123

another failure for Obuma
now no one will want to buy his unreliable electric cars

June 14 2012 at 10:48 AM Report abuse +1 rate up rate down Reply
Daniel

LOOK. I've said this before "THE LEADER FROM THE REAR" WILL try and spin this as part of HIS economic recovery, DON'T BE FOOLED, "THE COMMUNITY ORGANIZER" will say ANYTHING for a vote. I made a BIG mistake 4 yrs. ago and voted for this "LEADER" THAT won't happen again.

June 14 2012 at 10:41 AM Report abuse rate up rate down Reply
Daniel

I said this before, WATCH THE LEADER FROM THE REAR will try and spin lower gas prices as part of his economic recovery.If that doesn't work BLAME BUSH. Look I voted for this "LEADER" 4 yrs. ago and THAT WON'T HAPPEN AGAIN!

June 14 2012 at 10:38 AM Report abuse rate up rate down Reply
Alton

The only thin plunging is my bank account.

June 14 2012 at 10:20 AM Report abuse +2 rate up rate down Reply
Alton

This is a crock of BS. Gas is still to high and has been, who are they kidding.

June 14 2012 at 10:18 AM Report abuse +3 rate up rate down Reply