U.S producer prices decline the most in February since January 2015

The U.S Bureau of Labor Statistics released its monthly report on producer prices on Thursday. The data showed the producer price index (PPI) to have dropped to its worst reading in 5 years in February.

The Labor Department recorded February’s PPI to have declined by 0.6% that was marked the steepest drop since the start of 2015. In January, the U.S producer prices had registered a 0.5% increase. Analysts were expecting the February’s decline in PPI to remain capped at a much smaller 0.1%.

Core PPI Slips 0.3% In February And Gains 1.4% On A YoY Basis

As per the Labor department, the PPI was weighed by the costs of goods in February especially services and gasoline. In the 12 months that ended in February, the PPI posted a 1.3% gain versus 2.1% that was noted in January. On a year over year basis, analysts had anticipated a higher 1.8% growth in the U.S producer prices.

Excluding the volatile components like energy, food, and trade services, the so-called core PPI dropped 0.3% in February after climbing 0.5% in January. Analysts had expected the core-PPI to lose pace and grow by 0.1% in February. On a year over year basis, the core PPI grew by 1.4% versus 1.5% printed in January.

The PPI report came in contrast with the U.S consumer prices that were posted to have unexpectedly gained in February on Wednesday. The monthly CPI data also suggested steady growth in terms of underlying inflation.

The U.S Federal Reserve closely tracks the core PCE (personal consumption expenditures) price index for insight into its target of 2% inflation. On a year over year basis, the core PCE price index posted a 1.6% gain in January. February’s data for PCE price index is scheduled to be released in the upcoming weeks.

Figures For Producer Prices From Different Sectors In February

February’s data recorded a 3.6% decline in wholesale energy prices (0.7% decline in January), 0.9% decline in goods prices (0.1% increase in January), 1.6% decline in wholesale food prices (0.2% increase in January), 0.1% decline in core goods prices (0.3% increase in January), and a 0.3% decline in services prices (0.7% increase in January). Hotel accommodation and airline tickets also recorded the steepest decline in over a decade.

Healthcare services costs, however, increased 0.2% in February (0.6% gain in January) while portfolio management fees printed a 0.3% gain last month as compared to 2.3% growth recorded in January.

The effect of the U.S PPI report on the forex market was largely overshadowed on Thursday by the European Central Bank’s decision of keeping rates unchanged in its policy meeting.