Wholesale prices in the United States rose 6.2% in December from a year earlier, down from 7.3% in November and from a peak of 11.7% in March.
On a monthly basis, the Labor Department said Wednesday that its Producer Price Index, which measures costs before they reach consumers, dropped 0.5% from November to December.
"The big picture is one of rapid disinflation, with much more to come," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The data can provide an early sign of where consumer inflation is headed, reflecting prices charged by manufacturers, farmers and wholesalers. The index also flows into an inflation gauge the Federal Reserve closely tracks, the Personal Consumption Expenditures Price Index, for its overall 2% inflation goal.
Last month's drop was led by gas prices, which sank 13.4% from November to December. Nationally, gas prices averaged $3.36 a gallon Wednesday, according to AAA, down from a peak of $5 a gallon in mid-June. Arkansans were paying $3.03 on average Wednesday for regular gas, down from a June peak of $4.54, according to the auto club.
Food prices fell by a sharp 1.2%, led by fruit, vegetables and chicken. One exception was egg prices. Driven up partly by a wave of avian flu, egg prices soared 25% just from November to December.
Excluding volatile energy and food costs, so-called core producer prices rose only 0.1% from November to December. Measured year over year, core prices increased 5.5% in December, compared with 6.2% in November.
Producer prices in the nation's vast service sector -- from restaurants and hotels to airlines and entertainment venues -- ticked up 0.1% from November to December, the smallest such increase since last April. The Fed has been monitoring this area of the economy in particular as policymakers assess progress in combating high inflation.
But rising evidence shows that inflation across the economy is easing after having reached a four-decade peak last summer. At the consumer level, inflation also cooled in December for a sixth straight month to 6.5%, from 7.1% in November, according to the Labor Department.
An acceleration in workers' wages has been slowing, too, which could further help control inflation. In December, average wage growth in the U.S. was up 4.6% from 12 months earlier, compared with a recent peak of 5.6% in March.
Over the past year, the Fed has rapidly raised its key interest rate in an aggressive drive to cool borrowing and spending, and tame inflation, which began surging more than a year and a half ago.
The Fed's rate increases have, in turn, led to higher borrowing costs for consumers and businesses. The average mortgage rate is still nearly twice its level a year ago, though the rate has dipped in recent weeks. Loan costs for auto purchases, credit cards and a range of business borrowing are also up sharply.
Even as overall inflation gradually slows, costs continue to surge in some pockets of the U.S. economy. Particularly in the service sector, wage growth remains a contributing factor to broader inflation pressures.