(MENAFN- Arab Times) WASHINGTON Dec 12 (Agencies): US producer prices fell in November and were muted even outside of energy a sign of weak inflationary pressure that could point to persistent slack in the economy. The Labor Department said on Friday its producer price index for final demand dropped 0.2 percent a sharper fall than expected. A plunge in gasoline prices drove the decline. But a core measure of producer inflation which excludes food energy and trade services was flat. That could be worrisome for Federal Reserve policymakers who are expected to debate next week whether to keep a pledge that borrowing costs will stay at rock bottom for a 'considerable time.'
When compared to a year earlier that core index was up just 1.5 percent and the annual reading has been dropping a tenth of a point each month since September. Another core reading that only strips out food and energy was also flat on the month and up 1.8 percent from November 2013. Fed officials largely view the current low inflation environment as transitory and believe the likelihood of inflation running persistently below the US central bank's 2 percent target has diminished somewhat since early this year. The drop in gasoline prices for example could prove temporary. Moreover cheaper gas helps the economy by letting families spend more on other things and early data on retail spending in November has pointed to strengthening consumer demand. The data did not appear to have much impact on Wall Street trading. Yields on government debt held to lower levels and stock index futures pointed to a lower open after data indicated a softening in China's economy. The retreat of wholesale costs gives the Fed more leeway to keep interest rates at record lows in an effort to stimulate the economy. Many economists forecast the Fed will start raising rates next June. 'Inflation pressures remain very modest in the US ... which gives policymakers more wiggle room to hold back' said Jennifer Lee an economist at BMO Capital Markets. Inflation has already been below 2 percent for most of the past two years and falling gas prices could drive it even lower. The average price for a gallon of gas has fallen 30 cents in the past month to $2.62 on Thursday according to AAA. Benchmark US crude oil fell below $60 a barrel Thursday for the first time in more than five years suggesting gas prices could decline even further in the months ahead. Oil prices have fallen more than 40 percent since June. Partly because of cheaper gas the consumer price index was unchanged in October from the previous month. Compared with 12 months earlier consumer prices were up just 1.7 percent. Other trends are also keeping prices low. Average hourly pay has risen just 2.1 percent in the past year below the 3.5 percent to 4 percent that is typical in a healthy economy. That makes it harder for consumers to pay higher costs limiting retailers' pricing power. Americans are already showing some signs of spending the savings they're seeing at the gas pump. Retail sales rose by the most in eight months in November the government said Thursday a promising start to the holiday shopping season.
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