Wholesale prices fell half a percentage point in October, the Bureau of Economic Analysis reported Wednesday in an update to the producer price index, thanks in large part to cratering gas prices in the month.
The decrease was the biggest since April 2020, during the worst of the pandemic. Over 80% of the decline in the index for goods was attributable to a 15.3% drop in gas prices.
INFLATION FELL TO 3.2% IN OCTOBER IN POSITIVE SIGN FOR ECONOMY
The decline in prices in the month brought inflation through the year ending in October down to just 1.3% — a notable slowdown. The decline in headline inflation came after three straight months of increases and is welcome news for the economy, which has been strained under the burden of inflation.
“This was a great report that reaffirms all expectations for the continuing reduction of inflation,” wrote Rubeela Farooqi, the chief U.S. economist for High Frequency Economics.
The reported slowdown in inflation is likely to sway the Federal Reserve away from further rate hikes, which it has carried out in an effort to slow economywide spending and curb inflation.
Combined with the slowdown in inflation reported in the Consumer Price Index Tuesday, Wednesday’s report will raise expectations that the next move from the Fed will be to cut rates, rather than raise them further.
Inflation as measured by the CPI fell half a percentage point to 3.2% for the year ending in October. A 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.
The Fed’s next interest rate decision is Dec. 13.
Investors expect that the central bank is done with its tightening cycle, which has the target rate placed at 5.25% to 5.50%. That is the highest interest rates have been since around 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 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, that the economy is adding jobs is good news and bodes well for the United States avoiding a recession as higher rates limit borrowing and spending.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
The economy has also been expanding. GDP 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.
