US producer prices unexpectedly fall in October

People shop in a supermarket as rising inflation affects consumer prices in Los Angeles, California, US, June 13, 2022. REUTERS

US producer prices fell by the most in three-and-a-half years in October amid a sharp drop in the cost of gasoline, the latest indication of subsiding inflation pressures.

The producer price index for final demand declined 0.5% last month, the largest decrease since April 2020, the Labour Department's Bureau of Labour Statistics said on Wednesday. Data for September was revised lower to show the PPI increasing 0.4% instead of 0.5% as previously reported.

Economists polled by Reuters had forecast the PPI edging up 0.1%. In the 12 months through October, the PPI increased 1.3% after rising 2.2% in September. The report followed data on Tuesday showing consumer prices unchanged in October.

Cooling inflation together with slowing job and wage growth reinforced expectations that the US central bank's fastest monetary policy tightening campaign since the 1980s was over.

Financial markets are even anticipating a rate cut next May, according to CME Group's FedWatch tool. Since March 2022, the Fed has hiked its policy rate by 525 basis points to the current 5.25%-5.50% range.

Goods prices dropped 1.4% in October, with a 15.3 plunge in gasoline prices accounting for more than 80% of the decline. Goods prices rose 0.8% in September. Food prices fell 0.2%.