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Sharp fall in US Wholesale Inflation whilst Core inflation rises strongly

Economics / Strategic News Oct 17, 2006 - 05:00 PM GMT

By: Sarah_Jones

Economics

US Wholesale inflation fell by the largest amount in more than three years in September 06, as a record drop in the cost of gasoline offset rising prices in a number of other areas. The U.S. Labour Department reported that wholesale prices overall fell 1.3 per cent last month, nearly double the decline that analysts had been expecting. Gasoline prices plummeted 22.2 per cent, the biggest one-month decrease on record. But at the same time core inflation rose strongly by 0.6%.


Market Analysts had expected on average a drop of 0.7 percent in the headline PPI index and a 0.2 percent rise in the core rate, which excludes volatile food and energy costs.

On balance the conclusion is that inflation is moderating in the US, and thus further rate rises by the Federal reserve are unlikely, this is likely to be viewed as a negative for the Dollar and positive for equities & bonds.

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