Key inflation measure shows wholesale prices fell last month

New York CNN  — 

A key measure of inflation fell dramatically in February, according to the latest Producer Price Index, which tracks what America’s producers get paid for their goods and services.

Producer price increases slowed to an annual pace of 4.6% last month, significantly down from 6% in January, the Labor Department reported Wednesday. February prices fell by 0.1% after rising 0.7% in January.

Economists surveyed by Refinitiv had been expecting the 12-month rise in wholesale prices to slow to a 5.4% increase.

Taking out the often volatile food and energy components, core PPI also notched some stark declines: annual price increases dropped to 4.4%, and the index was unchanged from the month before (0% growth). Those are down from January’s downwardly revised 5% annual price gain and 0.1% monthly increase.

Contributing to the headline PPI decline was a 0.2% drop in final demand goods, which had spiked 1.2% in January, according to Bureau of Labor Statistics data. The final demand services index was down 0.1%, driven by a 0.8% drop in trade and a -1.1% drop in transportation and warehousing.

PPI is one of several closely watched inflation gauges. Because the producer-centric index captures price shifts upstream of the consumer, it’s sometimes looked to as a potential leading indicator of how prices may eventually land at the store level.

Consumer prices have come down, albeit more slowly.

The latest Consumer Price Index, which was released Tuesday, showed prices were up 6% during the 12 months ended in February. In January, the headline CPI measured 6.4%.

This story is developing and will be updated.