WASHINGTON -- Wholesale prices fell for a fourth straight month in February as a decline in food prices offset an increase in gasoline prices.
The Labor Department said Friday its producer price index, which measures inflation pressures before they reach consumers, dropped 0.5 percent in February. The figure follows a 0.8 percent fall in January, which had been a record decline in a government series that goes back to 2009.
Core producer prices, which exclude volatile food and energy costs, also fell 0.5 percent during the month. Over the past 12 months, producer prices have shed 0.6 percent while core prices have climbed a modest 1 percent.
Since last year, inflation has moved even further below the Federal Reserve's goal of seeing prices rise about 2 percent annually.
"Inflation is very much controlled in this environment, and we have a rising dollar that's going to put downward pressure," said Robert Brusca, president of Fact & Opinion Economics in New York. "The Fed very much wants to get inflation up into its target zone so that it can be more comfortable with where policy is, but it's just not happening."
Food costs were down 1.6 percent in February. Energy costs overall were flat as declines in natural gas and electric power combined with a gain in gasoline, which rose 1.5 percent.
Gasoline prices had been falling since the middle of last year and hit a six-year low in January of $2.03 a gallon, according to AAA. But gas prices have risen since then, with the nationwide average for a gallon of regular grade now at $2.45, up from $2.23 a month ago.
Paul Ashworth, chief U.S. economist at Capital Economics, said that about one-third of the drop in overall prices in February stemmed from a decline in profit margins at service stations. Those margins had risen for a time last year as gas stations took advantage of falling fuel costs to increase profits. But in February, the margins returned to more normal levels as gas prices rose.
Ashworth said nothing in the report changed his view that the Federal Reserve next week will stop using the word "patient" to describe how long it is prepared to wait before starting to raise a key interest rate from its record low level. Ashworth said he expects the first Fed rate increase to occur in June.
Robust hiring in the past 12 months and lower gasoline prices lifted consumer confidence in January and February to its highest levels since the recession. But those trends have yet to improve consumer spending this year, a key driver of economic activity. The government reported that retail sales fell for a third month in a row in February as harsh winter weather depressed shopping.
But many analysts look for those declines to reverse in the coming months. The economy is expected to turn in its strongest growth this year in a decade while overall inflation stays modest.
The producer price gauge is one of three monthly inflation reports released by the Labor Department, which also produces the consumer price index and the import cost measure.
Information for this article was contributed by Victoria Stilwell of Bloomberg News.
Business on 03/14/2015