U.S. wholesale prices cool by largest amount since April 2020

The numbers: The U.S. producer price index fell 0.5% in October, the Labor Department said Wednesday. That’s down from an 0.4% increase in October and the largest decrease since April 2020.

Economists polled by The Wall Street Journal had forecast a 0.1% advance.

The core producer price index, which excludes volatile food, energy prices, and trade services rose 0.1% in October, down from an 0.3% gain in the prior month.

Over the past year, headline PPI is up 1.3% in October down from 2.2% in the prior month.

Core prices are up 2.9% from a year earlier, up/down from 3% in October.

Key details The cost of goods fell 1.4% in October after a 0.8% gain in the prior month.

Energy prices fell 6.5% in October, down from a 3.1% gain in the prior month. Wholesale food prices fell 0.2% after a 0.7% rise in the prior month.

The cost of services was flat for the first time in six months. Core services registered the smallest gain since May.

Trade services, a measure of margins received by wholesalers, dropped for the second straight month.

Big picture: The data was flattered by a drop in energy and food prices, but inflation in the pipeline is looking soft. Economists said the data bolsters the case for no further interest rate increases from the Federal Reserve.

What are they saying? The report “feeds the soft landing narrative with subdued price pressures and resilience in activity,” said James Knightley, chief international economist at ING.

Market reaction: Stocks
DJIA

SPX
were set to open higher on Wednesday while the 10-year Treasury yield
BX:TMUBMUSD10Y
rose to 4.51% in early morning trading.

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