U.S. News: Producer Prices Log Another Monthly Drop, Showing the Weakness in Global Demand
U.S. wholesale prices sank further last month, a sign of how quickly the inflationary pressures of last summer have reversed.</br></br>Producer prices fell a seasonally adjusted 1.9% in December from the previous month, the Labor Department said, led by lower energy prices. It marks the fifth-straight monthly decline and a stunning reversal in just a few short months from the price pressures seen in mid-2008.</br></br>The lower prices bring some much-needed relief to hard-pressed businesses as the U.S. recession marches on -- but they also reflect weakness in global demand for goods. Manufacturing activity is down sharply in the world's biggest economies, including the U.S., Japan and Europe; it also has slowed in markets like China that once had enormous demand for raw materials. U.S. producer prices in December were down 0.9% from the previous year, the biggest yearly drop since 2001.</br></br>Energy prices fell 9.3% last month from November, as wholesale gasoline prices tumbled 25.7%. Food prices declined 1.5%. The declines are expected to be passed on to consumers, as businesses work to attract customers through heavy discounting. The Labor Department will release its December consumer prices on Friday.</br></br>Excluding food and energy, core producer prices held up last month, rising 0.2% from November and 4.3% from the previous year -- the largest annual gain in two decades. But core prices are expected to decline in the months ahead, which, combined with falling wages, is stoking concerns about a looming downward spiral of lower prices and spending known as deflation.