Ahead of the Bell: US Wholesale Prices

Published Wednesday June 13, 2012 ";var zflag_nid="1431";var zflag_cid="150/149";var zflag_sid="1";var zflag_width="1";var zflag_height="1";var zflag_sz="31";

WASHINGTON (AP) - A steep fall in gas costs likely pushed down a measure of U.S. wholesale prices in May for the second straight month and by the most in nearly three years.

Economists forecast that the producer price index likely dropped 0.6 percent last month, according to FactSet. That would be the steepest drop since July 2009, when food and gas prices were both plummeting.

Still, excluding volatile food and gas prices, so-called "core" producer prices are expected to have risen just 0.2 percent. More expensive cars and trucks could push up the core, economists at JPMorgan forecast.

The Labor Department will release the report at 8:30 a.m. Eastern time Friday.

The index measures price changes before they reach the consumer. Modest wholesale inflation reduces pressure on manufacturers and retailers to raise prices. That helps keep consumer prices stable, which boosts buying power and drives economic growth. Consumer spending makes up 70 percent of economic activity.

Mild inflation also gives the Federal Reserve room to hold interest rates at record-low levels and potentially take other steps to boost the economy.

Gas prices have tumbled 40 cents since peaking on April 6.

On Tuesday, the average nationally price for a gallon of gas averaged $3.54, according to AAA. That's down 19 cents from a month earlier.

In the 12 months that ended in April, wholesale prices rose just 1.9 percent. That was the smallest 12-month increase since October 2009. And it's far below the recent year-over-year peak of 7.1 percent last July.

Continued here:
Ahead of the Bell: US Wholesale Prices