U.S. Wholesale Prices Rose Modestly in November as Inflation Eased

U.S. wholesale prices rose less than forecast in November as falling energy prices kept inflation in check.

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In the 12 months ending in November, wholesale prices increased 5.7 percent, down from a 5.9 percent year-over-year pace in October and the smallest yearly increase since March.

The Labor Department’s core measure, which excludes food and fuel, rose 0.1 percent last month, while the producer price index,¬†which measures price changes before they reach consumers, climbed 0.3 percent, paced by a 1 percent advance in food prices.

The increase in food costs last month was led by a 12 percent jump in vegetable prices and an 8 percent gain in chickens.

Slowing growth in Europe and Asia may restrain the cost of raw materials, while high unemployment and stagnant wages may hold down demand in the U.S., giving companies little room to raise prices.

The leveling off of energy prices means less inflationary pressures, validating Federal reserve policymakers in their renewed pledge this week to keep borrowing rates “exceptionally low” through mid-2013.

Wholesale energy costs climbed just 0.1 percent last month, as higher prices for home heating oil and diesel fuel were offset by declines in natural gas and gasoline.

Fuel costs may actually decline in December. The price of crude traded on the New York Mercantile Exchange dropped from a closing high of $101.28 on December 6 to $94.94 yesterday after the Organization of Petroleum Exporting Countries raised its production ceiling.

Intermediate goods prices increased 0.2 percent in November, following a 1.1 percent drop in October. Prices of crude goods, or raw materials that require further processing, rose 3.8 percent last month after falling 2.5 percent the month earlier.

After soaring earlier in the year, many companies are hoping cotton prices will come down. A strengthening of the U.S. dollar over major foreign currencies has made foreign goods cheaper in the U.S. over the past few months.

Since August 31, the Dollar Index, which tracks the currency against that of six major trade partners, has gained about 8.7 percent after falling 11 percent in the 12 months ending August 31.

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