US PPI fell by 1.9% in December the Bureau of Labor Statistics confirmed today. Economists had been expecting a 2.0% drop following November’s 2.2% decline.

Although today’s US PPI number was mildly better than expected it still represents the fifth straight month of declines in wholesale inflation. Furthermore, the YoY index now shows a decline of 0.9%, the lowest reading since October 2006. The yearly Producer Price Index has deteriorated from a high of 9.9% in a few short months since July 08.

The decline seen in December can mostly be attributed to a 9.3% drop in Energy prices and a 1.5% fall in Foods. Energy prices have fallen at the wholesale level for 5 months in a row, posting an 11.2% drop in November.

On closer inspection, the decline in Energy is due to a 25.7% fall in gas prices (tying the record set in November of this year), a 24.1% fall in home heating oil (largest drop since April 2003), and declines of 21.8 and 17.5 percent in liquefied petroleum gas and diesel fuel respectively.

Inflation in foods has been mixed of late, with only 2 of the last 5 months in negative territory. However, the 1.5 percent fall seen today would suggest acceleration towards the negative after a flat November and a slight 0.2% decline in October.

US Core PPI (excluding food and energy) increased by 0.2% in the month of December. This is slightly higher than the 0.1% that had been expected by economists and higher than the 0.1% seen in November.

Core Producer Prices now stand at 4.3% on a yearly basis, the highest seen since October’s 4.4%.

US PPI Visual Analysis and Historical Data

Wholesale inflation fell by 2.2% in November, the US Bureau of Labor Statistics reported today, completing a fourth straight monthly decline. The consensus estimate had been for a 2.0 percent drop following on from October’s record drop of 2.8%.

PPI MoM for the last 12 reporting periods

Leading the declines in November were energy prices. After a 12.8% drop in October, energy was down 11.2% for the month of November. Liquefied petroleum gas and home heating oil accelerated declines in November, down 25.7 and 23.3 percent respectively after 24.9 and 9.6% declines one month earlier. Declines slowed in residential natural gas and unleaded premium and mid-premium gasoline.

Prices for consumer foods came in unchanged after a fall of 0.2% in October. Within the index, eggs posted the sharpest monthly fall, down 18.2% with milled rice and pork both down 5.3%. Fresh fruit and vegetables were up by 2.1 and 3.8 percent respectively.

The Producer Price Index shows that wholesale prices are 0.4% higher than they were at the same time last year. However, this has fallen sharply from the peak of 9.9% in July and 5.2% just one month ago. Indeed, the current yearly figure is the lowest seen since January of 2007 and is further evidence that price pressures are falling away sharply in the US.

Elsewhere the Core PPI was up 0.1% MoM and inline with economists’ expectations. Traders had been expecting a moderation following the 0.4% seen in October. On a yearly basis the core number, which strips out the volatile food and energy components, is up by 4.2%.

Aside from the headline number for finished goods the index for intermediate goods fell by a record 4.3% while crude goods were down by 12.5%. Last month Intermediate goods dropped by 3.9% while crude goods fell by 18.6%.