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Saturday 22nd of January 2011
March 17, 2010    

US producer prices in February fall

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by Kay Murchie

The US Labor Department has today reported a fall in producer prices of 0.6% in February - the biggest fall since July 2009.

The fall, which was worse than expected, was attributed to a 2.9% decline in energy costs.

Compared to February 2009, producer prices grew 4.4%, but they slowed from a 4.6% annualised rise in January and was slightly below market forecasts for a 4.9% increase.

The news comes just a day after the US Federal Reserve opted to keep interest rates at the historically low level of between 0% and 0.25%.

After the one day meeting, the Federal Open Market Committee (FOMC) voted 9-1 to keep rates unchanged.

Interest rates in the world’s largest economy have been at the low level since December 2008 and the bank has previously said that as a result of subdued inflation and high unemployment, low interest rates are required for “an extended period”.

Joseph Brusuelas, chief economist at Brusuelas Analytics in Stamford, Connecticut, comments: “There is still a lot of tremendous slack in the economy, both in the labour market and in terms overall industrial capacity.

“Moreover, firms do not have pricing power even though we see price increases at earlier stages of production. Firms are using their increasing profit margins to absorb the rise in those costs and are not passing them downstream to customers,” added Brusuelas.

Tomorrow, the Labor Department will publish consumer prices for February.

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