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U.S. producer prices post first decline in nearly 1-1/2 years

Reuters  |  WASHINGTON 

(Reuters) - U.S. prices fell for the first time in nearly 1-1/2 years in December amid declining costs for services.

The Labor Department said on Thursday its price index for final demand slipped 0.1 percent last month. That was the first drop in the since August 2016 and followed two straight monthly increases of 0.4 percent.

In the 12 months through December, the rose 2.6 percent after accelerating 3.1 percent in November. Economists polled by had forecast the rising 0.2 percent last month and increasing 3.0 percent from a year ago.

The increased 2.6 percent in 2017 after advancing 1.7 percent in 2016. A key gauge of underlying price pressures that excludes food, and edged up 0.1 percent last month.

The so-called core increased 0.4 percent in November. It rose 2.3 percent in the 12 months through December. The core increased 2.4 percent in the 12 months through November. It gained 2.3 percent in 2017 after rising 1.8 percent in 2016.

Coming on the heels of a report on Wednesday showing a sharp moderation in import prices in December, the weak report might temper expectations that will accelerate this year even though its correlation with consumer prices has weakened.

Economists are hoping that a tightening labor market and recent weakness in the dollar will lift towards the Federal Reserve's 2 percent target this year.

The U.S. central bank's preferred measure, the personal consumption expenditures (PCE) and energy, has undershot its target since May 2012. The greenback lost 7 percent of its value against the currencies of the United States' main trading partners last year.

The Fed raised interest rates three times in 2017. Although the central has forecast three rate hikes for this year, it will depend on the outlook. There are concerns among some Fed officials that the factors that held down early last year could become more persistent.

Last month, the price of services fell 0.2 percent after rising for nine straight months. That reflected a 10.7 percent drop in margin for automotive fuels and lubricants retailing.

prices fell 0.7 percent, the biggest drop since May, after increasing 0.3 percent in November. prices were unchanged last month after jumping 4.6 percent in November.

The cost of increased 0.2 percent last month after being unchanged in November. Those costs feed into the core PCE price index.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, January 11 2018. 19:33 IST