Wholesale prices in the U.S. dropped in April by the most in three years, reflecting a decrease in fuel costs that is helping underpin profits.
The producer-price index declined 0.7%, the biggest decrease since February 2010, after falling 0.6% in March, according to a Labor Department report released today in Washington. The median estimate in a Bloomberg survey of 73 economists projected the index would decline 0.6%. So- called core wholesale inflation, which excludes often-volatile food and energy prices, climbed 0.1%.
Slow growth in the U.S. and abroad is holding input-price gains in check for American factories. Absent a surge in inflation, policy makers at the Federal Reserve have the option of weighing whether the U.S. economic expansion needs more stimulus to pick up.
“For now, producers are in a pretty comfortable position,” said Jacob Oubina, a senior economist at RBC Capital Markets LLC in New York, who correctly forecast the April drop in prices. “Input costs are benign at the moment.”
Another report today showed manufacturing in the New York region unexpectedly shrank in May as factories received fewer orders and sales stagnated. The Federal Reserve Bank of New York’s general economic index declined to minus 1.4 this month from 3.1 in April. Readings less than zero signal contraction in New York, northern New Jersey and southern Connecticut. The median projection in a Bloomberg survey called for an increase to 4.
Stock-index futures held earlier losses after the reports. The contract on the Standard & Poor’s 500 Index maturing in June fell 0.2% to 1,645.2 at 8:43 a.m. in New York.
Economists’ estimates for the April producer-price index ranged from a drop of 1.2% to a gain of 0.5%. The increase in core wholesale prices matched the median forecast in the Bloomberg survey.
Compared with a year ago, companies paid 0.6% more for materials in April, the smallest year-to-year gain since July. The core price index climbed 1.7% in the past 12 months through April, the same as in the prior month, today’s report showed.
Fuel costs dropped 2.5% in April from the previous month, led by an 8.8% plunge in the cost of home heating oil that was the biggest in almost four years.