A gauge of U.S. business prices fell in January, a sign that cheaper gasoline is helping push annual inflation gauges toward negative territory for the first time since the recession's immediate aftermath.
The producer-price index for final demand, which measures prices that businesses receive for their goods and services, declined a seasonally adjusted 0.8% last month from December, the Labor Department said Wednesday. It fell 0.1% excluding the volatile food and energy categories. Economists surveyed by The Wall Street Journal had expected prices would fall 0.4% and so-called core prices would rise 0.1%.
For the 12 months through January, PPI for final demand was flat, down sharply from 1.1% annual growth in December. Excluding food and energy, prices rose 1.6% in January from a year earlier.
"We believe that soft global growth combined with a stronger dollar will result in a flat to lower trend for prices at the final demand producer level," MFR Inc. chief U.S. economist Joshua Shapiro said in a note to clients.
Broad U.S. inflation gauges have moved lower in recent months, due in large part to falling prices for gasoline and other petroleum products. Prices for energy goods tumbled 10.3% in January from the prior month, and the gasoline index sank 24% from December, according to Wednesday's report.
But prices were broadly weak even outside energy. Food prices fell 1.1% from December, and prices for services declined 0.2%. Prices for outpatient hospital care dropped, which economists at BNP Paribas said could reflect lower Medicaid payments to doctors.
U.S. inflation has been subdued in recent years, even before global oil prices began to tumble in mid-2014. The Labor Department's consumer-price index rose 0.8% in December from a year earlier, its lowest reading since October 2009. The Commerce Department's personal consumption expenditures price index posted annual growth of 0.7% in December, well below the Federal Reserve's 2% target.
The Fed last month said in a policy statement that falling oil prices and other factors may push prices down for a time, but inflation should move back toward 2% in the coming years once "transitory effects" fade.
Core inflation has been more stable in recent months, though it also has slipped. Excluding food and energy, the CPI in December rose 1.6% from a year earlier, down from 1.7% in November and 1.8% in October. Core PCE prices rose 1.3% in December, down from 1.4% in November and 1.5% in October.
Persistently low inflation can be a signal of underlying weakness in the economy. A broad and persistent decline in consumer prices, known as deflation, could spark an economically damaging downward spiral of lower spending, job losses and further price cuts.
Deflationary episodes are rare in the U.S., though the CPI and PCE inflation gauges both dipped into negative territory during and just after the 2007-2009 recession. Fed policy makers may shrug off a new stretch of negative readings if they believe it's a passing effect of cheaper oil.
"I don't see deflation as a risk in the U.S. economy," Federal Reserve Bank of Philadelphia President Charles Plosser said last week.
Still, Japan has struggled for decades to overcome deflation, and consumer prices in the eurozone declined on an annual basis in January and December.
Write to Ben Leubsdorf at ben.leubsdorf@wsj.com
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