Wholesale inflation, as measured by the producer price index, declined to 1.3% for the year ending in October as the Federal Reserve keeps interest rates high.
The new numbers were released on Wednesday by the Bureau of Economic Analysis. The decline came after three straight months of increases and is welcome news for the economy, which has been strained under the burden of inflation.
On a month-to-month basis, the wholesale price index fell by a half of a percentage point.
Notably, a big part of the decline in the index is attributable to a 15.3% drop in gas prices.
This latest numbers are an indication that inflationary pressures are continuing to weaken amid the Fed’s efforts to tighten monetary policy and come a day after the even-more-closely-watched consumer price index posted declines that were better than anticipated.
INFLATION FELL TO 3.2% IN OCTOBER IN POSITIVE SIGN FOR ECONOMY
Inflation as measured by the CPI fell half a percentage point to 3.2% for the year ending in October. A notable share of that decrease was due to declining gasoline prices, which had been putting upward pressure on the headline CPI number.
On a month-to-month basis, CPI inflation growth was flat at 0% — which was better than forecasters had anticipated.
This latest PPI data coupled with the CPI data will provide the Fed with critical information ahead of the next interest rate decision on Dec. 13.
Investors expect that the central bank is done with its tightening cycle, which has the target rate now placed at 5.25% to 5.50%. That is the highest interest rates have been since around the time of the financial crisis, causing pain for consumers already dealing with too-high inflation.
Still, there are some major bright spots in the economy.
The country’s labor market has held up remarkably well despite the Fed’s rate hikes, although it has just recently shown some signs of softening.
The economy added 150,000 jobs in October, fewer than most economists had projected and well below September’s gain of 297,000. Still, the fact that the economy is still adding jobs is good news and bodes well for the U.S. avoiding a recession as higher rates limit borrowing and spending.
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The economy has also been expanding. Gross domestic product growth has been humming right along this year.
GDP growth actually accelerated to a 4.9% seasonally adjusted annual rate in the third quarter of this year, up from 2.1% the quarter before — a reading that surpassed the expectations of forecasters.
