The cost of finished consumer foods declined 0.8% as vegetable prices fell by almost 11%. Squash prices plunged 62%, the most in five years.
Prices also dropped further down the production pipeline. Expenses for intermediate goods, including diesel fuel and chemicals, decreased 0.6%. Costs for crude goods, such as corn and metals, fell 0.4%.
Officials at the Fed are debating what slower inflation means for monetary policy. Federal Reserve Bank of Philadelphia President Charles Plosser said yesterday that recent tepid price gains don’t yet warrant a response.
“Should inflation expectations begin to fall, we might need to take action to defend our inflation goal, but at this point, I do not see inflation or deflation as a serious threat in the near term,” Plosser said.
Central bankers including St. Louis Fed President James Bullard said last month persistent disinflation may require the Fed to provide stimulus beyond the $85 billion in monthly bond purchases it has already undertaken.
Consumer prices rose 1% in March from a year earlier, the least since October 2009 as measured by the Fed’s preferred gauge of inflation. The Fed aims for a 2% inflation pace.
Manufacturing executives, such as those at Cooper Tire & Rubber Co., the second-largest U.S. tiremaker, have also taken notice of the lack of price pressures.
“We believe raw material prices have been constrained due to relative low growth in the global economy,” Roy Armes, the Findlay, Ohio-based tiremaker’s chief executive officer, said during a May 9 earnings call. An index of input costs tracked by Cooper was down 10% in the first quarter compared with a year earlier, he said. “However, we continue to maintain that, on a longer-term basis, raw-material prices will generally trend higher and, at times, may be volatile as economic growth gains momentum in the future.”
The producer-price index is one of three monthly inflation gauges released by the Labor Department. The import-price index, published yesterday, fell 0.5% in April on cheaper fuel. The consumer-price index, due tomorrow, is expected to decline 0.3%, according to the median estimate in a Bloomberg survey of economists.