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US Producer Prices Plummet in December, Exceeding Predictions

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Producer prices in the United States decreased more than expected in December as energy and food costs plummeted, providing more signs that inflation was slowing.

According to the Labor Department, the producer price index for final demand fell 0.5% last month. The November data was revised lower, with the PPI climbing 0.2% rather than 0.3% as initially reported.

The PPI grew 6.2% in the 12 months through December, following a 7.3% gain in November. Reuters surveyed economists predicted the PPI will fall 0.1% on the month while rising 6.8% year on year.

The data comes on the heels of news last week that monthly consumer prices decreased in December for the first time in more than two and a half years. As the Federal Reserve’s strongest rate hike cycle since the 1980s cools demand for goods, inflation is easing. This might allow the Federal Reserve of the United States to slow the pace of its rate increases even further next month.

The dip in the PPI was accounted for by a 1.6% decrease in the prices of goods. Goods rose 0.1% in November but were held back by a 7.9% decline in energy and a 1.2% drop in food costs.

Producer prices rose 0.1% in December, excluding volatile components such as food, energy, and trade services. In November, the core PPI increased by 0.3%.

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The core PPI increased by 4.6% in the 12 months through December after climbing 4.9% in November.

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