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National News

March 15, 2014

U.S. producer prices dip 0.1 percent in February

WASHINGTON (AP) — The prices companies receive for their goods and services fell slightly in February, the latest sign that inflation is tame.

The producer price index, which measures price changes before they reach the consumer, dropped 0.1 percent in February, the Labor Department said Friday. That’s the first decline since November. A sharp fall in the price markups by wholesalers and retailers pushed down the index.

Producer prices rose 0.9 percent from 12 months ago. That’s the smallest 12-month increase since last May.

Wholesale food and energy prices increased, as did the cost of pharmaceuticals. Excluding the volatile categories of food, energy and retailer and wholesaler profit margins, core prices ticked up 0.1 percent.

The data also reflects the impact of aggressive discounting by clothing and shoe stores. Their profit margins fell 9.3 percent, the steepest on record. Gas stations and grocery stores also reduced their markups.

“The overall takeaway ... is that inflation pressures remain quiescent for the time being,” Joseph LaVorgna, an economist at Deutsch Bank, said in a note to clients.

The figures underscore that inflation remains largely in check. Businesses have struggled to raise prices because of historically high levels of unemployment and meager wage growth. That’s made it harder for consumers to pay more. And with unemployment high, those with jobs are less able to demand higher pay.

The index was expanded in January to include services and construction, in addition to goods. That’s made it a more comprehensive measure.

The government will release its better-known consumer price index on Tuesday.

Low inflation has enabled the Federal Reserve to pursue extraordinary stimulus programs to try to boost economic growth. It has kept the short-term interest rate it controls at nearly zero for more than five years. It has also been purchasing bonds in an attempt to lower long-term interest rates to encourage more borrowing and spending.

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