Wholesale prices in the U.S. unexpectedly declined in April from the prior month, indicating inflation is well-contained as Federal Reserve officials weigh when to raise the benchmark interest rate.
The 0.4 percent drop in the producer-price index followed a 0.2 percent gain in March that was the first increase in five months, the Labor Department reported Thursday. Over the past 12 months, wholesale prices fell 1.3 percent.
A plunge in energy prices in the second half of 2014 and a stronger dollar have muted wholesale prices. Fed officials are looking for signs that price growth will rise toward their goal as they consider raising rates for the first time in nine years.
"Inflation is still very tame," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, N.Y. "If anything, it's a little weaker."
Another report Thursday showed fewer Americans than forecast filed applications for unemployment benefits last week, pushing the average over the past month to the lowest level in 15 years and underscoring labor-market strength.
Unemployment-benefits claims decreased by 1,000 to 264,000 in the seven days ended Saturday, according to data from the Labor Department. The four-week average, a less-volatile measure, was the lowest since April 2000.
The year-over-year drop in wholesale inflation followed a 0.8 percent decline in the 12 months through March.
The report showed fuel costs decreased 2.9 percent last month and food expenses fell 0.9 percent.
The producer price index excluding volatile food and fuel prices decreased 0.2 percent from the prior month, depressed by falling profit margins at wholesalers and retailers. The measure was forecast to rise 0.1 percent after a 0.2 percent increase in March.
The personal-consumption expenditures index, the Fed's preferred inflation gauge, rose 0.3 percent in March from a year earlier and has been below the Fed's 2 percent goal since May 2012. The core measure increased 1.3 percent in the 12 months ending in March.
Fed officials are monitoring inflation and labor-market progress as they debate when to raise the benchmark interest rate for the first time since 2006. The first increase will take place after the policymakers' meeting in September, according to 73 percent of economists in an April 22-24 Bloomberg survey.
Thursday's producer price index reading is one of three monthly inflation gauges from the Labor Department. The consumer price index, due for release May 22, rose 0.1 percent in April, according to the Bloomberg survey median. A report Wednesday showed the cost of imported goods fell 0.3 percent last month, marking the 10th-straight decline as the dollar rose and overseas economies cooled.
The unemployment-benefits report indicated fewer workers are being let go, a sign that demand for staffing remains robust and that a slowdown in economic growth was because of transitory factors, such as bad weather and port disputes on the West Coast.
Persistently low firings and greater employment gains should help wages pick up, supporting consumer spending, analysts said.
"Labor-market conditions are quite firm," said Raymond Stone, managing director at Stone & McCarthy Research Associates in Princeton, N.J. "Typically, when you have low claims you have strong payroll numbers."
Most analysts predict the U.S. economy is expanding in the April-June quarter, though the bounce-back hasn't been as strong as many had hoped.
Consumers spent cautiously in April, according to a report on retail and restaurant sales Wednesday. Americans have not ramped up their spending so far this year, as economists had predicted, despite strong job gains and gas prices that are $1 a gallon cheaper than a year ago.
The weak retail sales report led JPMorgan Chase to cut its forecast for second-quarter growth to an annual rate of 2 percent, down from 2.5 percent.
Information for this article was contribute by Michelle Jamrisko and Nina Glinski of Bloomberg News and by Christopher S. Rugaber of The Associated Press.
Business on 05/15/2015