Falling Food and Gas Costs Push U.S. Wholesale Prices Lower Again

whole food pricesBy CHRISTOPHER S. RUGABER

WASHINGTON -- U.S. wholesale prices fell for the third month in a row last month, pushed down by falling food and gas costs. The drop is the latest evidence inflation is tame.

The producer price index dropped 0.2 percent in December, the Labor Department said Tuesday. That follows a decline of 0.8 percent in November.

The index measures price changes before they reach the consumer. Wholesale prices rose 1.3 percent in 2012, much lower than the 4.7 percent increase in 2011.

Excluding the volatile food and energy categories, core wholesale prices ticked up 0.1 percent in December. They rose 2 percent in 2012, below a 3 percent increase in 2011.

Low inflation means consumers have more money to spend, which helps the economy. It also gives the Federal Reserve more room to keep interest rates low in an effort to spur economic growth. If prices were to begin rising rapidly, the central bank might be forced to raise rates in response.

As long as inflation stays mild, the Fed said it plans to keep the short-term interest rate it controls near zero until the unemployment rate falls to at least 6.5 percent.

Food prices fell 0.9 percent in December, the biggest drop in 19 months. More than one-third of the decline resulted from a 4.8 percent fall in beef and veal prices. The cost of vegetables and cheese also declined.

The drop in food costs was the first since May and comes after a 1.3 percent increase in November. That was the biggest rise in nearly two years.

Not everything was cheaper last month. The cost of women's and girls' clothes jumped 1.4 percent, the most in nine years. Fresh fruit prices rose 2.7 percent, while car prices increased 0.5 percent.

Those price increases could get passed on to the consumer in the coming months, but probably not by as much. High unemployment and weak wage increases will make it hard for retailers to pass on all of the higher costs.

Gas prices fell sharply this past fall, dragging the overall index lower. Nationwide, the average cost of gas was $3.30 a gallon on Monday, according to AAA. That's about the same as it was a month ago and well below summer prices that nearly touched $4 a gallon.


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nthereoff

Tell me agan what went down? The price of my home . My pay check. Other then theses meanless thing your right. What ever you think people are not stupit..

January 19 2013 at 6:59 PM Report abuse +1 rate up rate down Reply
meyerjrj

Food and fuel are nearly double 2005 prices and our take home pay might be the same as 2005 if you are one of the lucky ones and we're supposed to be excited about this? Mr. Rugaber must me on the White House payroll to come out with this crap!

January 16 2013 at 5:09 PM Report abuse +1 rate up rate down Reply
wfreeberg

Gas under $3.00 and food inexpensive in eastern Iowa.

January 16 2013 at 3:03 PM Report abuse +1 rate up rate down Reply
1 reply to wfreeberg's comment
marine1942

where is Iowa ?

January 21 2013 at 9:04 AM Report abuse +1 rate up rate down Reply
thedtecter

LOL, gas here is up 30 cents/gallon since mid-December. I read this and thought of the Kevin Kline movie "Dave" where the real president had a $42 billion program to help consumers feel good about things they already bought....

January 16 2013 at 1:33 PM Report abuse +1 rate up rate down Reply
jdykbpl45

Bought gas lately? Food? More Obama lies, from his friends at Huff, suck, post.

January 15 2013 at 6:05 PM Report abuse +1 rate up rate down Reply
brinseana

If food prices are falling, why are the prices going up in the stores every week?

January 15 2013 at 3:45 PM Report abuse +2 rate up rate down Reply
ehetrick

Falling food prices?! Where? Certainly not here!

January 15 2013 at 2:57 PM Report abuse +2 rate up rate down Reply
samuri.sansui

After the debt ceiling debacle, standard and poor will devalue our credit rating along with all the other credit raters. The Obama administration will totally screw the rest of any recovery for this crippled economy.

January 15 2013 at 1:30 PM Report abuse +1 rate up rate down Reply
samuri.sansui

With Ben Bernanke devaluing the dollar for us, we still need more money to purchase food and gas. You FED asssholes should be hung by your nuts.

January 15 2013 at 1:26 PM Report abuse +2 rate up rate down Reply
1 reply to samuri.sansui's comment
jdykbpl45

Trouble is that they do not have any!

January 15 2013 at 6:07 PM Report abuse +2 rate up rate down Reply
samuri.sansui

Good for the wholesalers

January 15 2013 at 1:16 PM Report abuse rate up rate down Reply