Decline in Price Index Affirms Low Inflation
Further evidence that inflation is dormant emerged yesterday as the government reported a 0.4 percent drop in the producer price index last month, the biggest decline in more than a year.</br></br>The report cheered financial markets, but an early rally in the stock market petered out after the Dow Jones industrial average came within 42 points of breaching the 10,000 level. The average finished the day at 9876.35, down 21.09 points, after several big companies issued disappointing earnings forecasts.</br></br>Bonds rose, with the 30-year Treasury bond gaining $5.53 per $1,000 invested, and its yield falling 0.04 percent to 5.52 percent.</br></br>The fall in the PPI, which measures the prices of finished goods produced at factories, farms and refineries, was mostly from decreases in the volatile food and energy categories. The food index dropped 1.4 percent, because of falling prices for meat and vegetables, and the energy index fell 1 percent mainly because of a steep decline in heating oil prices.</br></br>But even the "core" index, which excludes food and energy, was flat in February, underscoring the remarkable absence of inflationary pressures in the robust U.S. economy.