Main Street got a dose of good news Tuesday in the form of the producer price index, which showed prices at the wholesale level fell sharply in October, but the news was more mixed for the manufacturing community.
The Labor Department said the PPI dropped by 1.6 percent last month, marking the biggest decline in 5 years. While the falloff in overall prices was helped along by a drop in energy costs, even the so-called “core” reading – which excludes the volatile energy and food sectors – dropped by a significant 0.9 percent. That was largest decline in about 13 years.
The Labor Department said prices for light trucks dropped 9.7 percent, and passenger cars fell 2.3 percent.
Meanwhile, the PPI for intermediate materials, supplies and components fell by 1.1 percent, though excluding food and energy, prices were unchanged. Materials for durable manufacturing eased 0.1 percent, with prices for hot rolled steel and strip falling 2.2 percent.
The decline in the PPI for the Net Output of Total Manufacturing Industries slowed to 0.6 percent in October from 1.9 percent a month earlier. Prices received by the petroleum and coal products manufacturing industry group fell 5.7 percent after decreasing 16.2 percent in September.
The industry group index for plastics and rubber products turned up after falling in the prior month, and prices received by the machinery manufacturing industry group rose more than in September. The increase in the industry group index for transportation equipment slowed to 0.3 percent in October from 0.9 percent a month earlier. Prices received by the industry groups for food manufacturing, wood product manufacturing, computer and electronic product manufacturing, and for beverage and tobacco product manufacturing turned down after rising in September.
In October, the Producer Price Index for Total Manufacturing Industries was 155.8, 0.5 percent below its year-ago level.
The fall in energy prices is certainly welcome news for manufacturers, and the latest PPI reading is likely to quiet whatever talk there is about the Federal Reserve raising interest rates again anytime soon.