Core Inflation Drops by Most in 13 Years

by Patrick Lunsford, CollectionIndustry.com

Core producer prices, a measure of U.S. inflation that excludes food and energy prices for wholesalers, fell by 0.9% in October, the largest drop in 13 years, the Department of Labor reported Tuesday. The drop reflected a massive drop in car and SUV prices as U.S. manufacturers re-introduced incentives to commercial buyers.

More broadly, the Producer Price Index (PPI) dropped 1.6% in the month, led by declining gas prices. This was the largest drop in that figure since October 2001, and followed another large drop ? 1.3% — in September of this year.

The easing of inflation took most economists completely by surprise. Analysts were expecting index to fall by 0.5%, while core prices were expected to rise 0.1%, according to Marketwatch.

It is also been speculated that the drop in inflationary pressures will be enough to prevent the cooling U.S. economy from slipping into a recession.