Wholesale prices in the U.S. increased in October for just the second time in the past four months, indicating inflation will not be a concern for the Federal Reserve.
The 0.3% increase in prices paid to factories, farmers and other producers was smaller than forecast and followed a 0.6 percent drop in September, according to Labor Department data released today in Washington. Excluding food and fuel, so-called core prices unexpectedly dropped 0.6 percent, capping the smallest 12-month gain in five years.
Excess capacity near June’s record low of 68.3% will probably prevent suppliers from passing on the recent rebound in commodity costs for months to come. The report underpins Fed expectations, reiterated yesterday by Chairman Ben S. Bernanke, that inflation will be "subdued," allowing policy makers to keep interest rates low for an "extended period."
As well, industrial production rose less than forecast in October, restrained by reductions in the manufacturing of autos and business equipment such as computers, a report from the Fed also showed today.
Output at factories, mines and utilities rose 0.1% following an increase of 0.6% in September. Manufacturing production fell for the first time in four months, while utility output jumped 1.6%.
Economists forecast prices would rise 0.5%. Estimates ranged from no change to an increase of 1.3%.
The decrease in prices excluding food and energy last month was the biggest since July 2006. The core measure was forecast to rise 0.1% after a 0.1% drop a month earlier, according to a survey of experts.
