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WASHINGTON (Reuters) - U.S. producer prices dropped in October for a second straight month and the cost of services fell, pointing to subdued inflation pressures that would argue
against the Federal Reserve raising interest rates next month.
The Labor Department said on Friday its producer price index fell 0.4 percent last month after falling 0.5 percent in September. In the 12 months through October, the PPI fell 1.6 percent, the largest decline since the revamped series started
in 2009 and following on the heels of a 1.1 percent drop in September.
October also marked the ninth straight 12-month decrease in the index. Economists polled by Reuters had forecast the PPI rising 0.2 percent last month and dropping 1.2 percent from a year ago.
A strong dollar and tepid global demand have dampened price pressures, leaving inflation constantly running well below the Fed's 2 percent target. Despite weak inflation, economists expect the U.S. central bank will raise interest rates next
month after a robust employment report for October.
Producer inflation is likely to remain weak after a report this week showed import prices fell in October for a fourth straight month.
In October, services accounted for 70 percent of the decrease in the PPI. Services fell 0.3 percent after dropping 0.4 percent in September.
Over 70 percent of the decrease was attributed to margins received by wholesalers and retailers, which fell 0.7 percent.
There were declines in portfolio management, loan services and residential real estate services.
Energy prices were unchanged after falling 5.9 percent in September. Wholesale food prices fell 0.8 percent in October after a similar drop in the prior month.
A key measure of underlying producer price pressures that excludes food, energy and trade services dipped 0.1 percent in October after falling 0.3 percent in September. The so-called core PPI was up 0.4 percent in the 12 months through October.
Reporting by Lucia Mutikani; Editing by Paul Simao