WASHINGTON, Feb 14 (Reuters) - U.S. producer prices fell for a second straight month in January, leading to the smallest annual increase in 1-1/2 years, the latest sign of benign inflation that could allow the Federal Reserve to be patient about raising interest rates this year.
The Labor Department said on Thursday its producer price index for final demand dipped 0.1 percent last month as the cost of energy products and food fell. The PPI dipped 0.1 percent in December.
In the 12 months through January, the PPI rose 2.0 percent. That was the smallest gain since July 2017 and followed a 2.5 percent rise in December. Economists polled by Reuters had forecast the PPI edging up 0.1 percent in January and increasing 2.1 percent on a year-on-year basis.
A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.2 percent last month after being unchanged in December.
The so-called core PPI increased 2.5 percent in the 12 months through January, the smallest gain since January 2018, after rising 2.8 percent in December.
The report came on the heels of data on Wednesday showing consumer prices were unchanged in January for a third straight month. Inflation remains tame despite a tightening labor market that is starting to push up wage growth, buttressing the Fed’s pledge to be “patient” before raising interest rates further.
Last month, wholesale energy prices fell 3.8 percent after declining 4.3 percent in December. Wholesale food prices dropped 1.7 percent last month after rising 2.6 percent in December.
Overall, the cost of wholesale goods tumbled 0.8 percent in January after falling 0.3 percent in the prior month. Core goods rose 0.3 percent after edging up 0.1 percent in December. The cost of services rose 0.3 percent in January after being unchanged in the prior month.