Wholesale prices fell for the second straight month in September, but excluding volatile energy and food costs, core prices posted their largest annual gain in more than 17 years.
The Labor Department said Wednesday that the producer price index, which measures inflation pressures before they reach the consumer, fell 0.4 percent in September after a 0.9 percent drop in August. Last month's decline matched analysts' expectations.
But the 0.4 percent increase in the core rate was above analysts' expectations of a 0.2 percent increase. Core wholesale prices also are up 4 percent from last September, the largest increase year-over-year since February 1991.
The decline in overall wholesale prices could restrain consumer prices in coming months, a bit of good news for the economy. Lower inflation makes it easier for the Federal Reserve to cut its target interest rate to stimulate economic growth. Many economists expect the Fed to cut rates at its Oct. 28 meeting, if not before.
The price of natural gas used in homes fell by a record 8.2 percent last month, the department said, while home heating oil fell by 13.9 percent, the steepest drop in two years.
Wholesale gas prices fell by 0.5 percent in September, the department said. Prices at the pump also have fallen sharply to a national average of about $3.16 a gallon (83 cents a liter) down from a record $4.14 ($1.05 a liter) this summer, according to auto club AAA.
Producer prices rose sharply for three months this summer, as oil prices rose to a record level near $147 a barrel in July and prices of agricultural commodities also soared.
The impact of those trends can be seen in yearly figures. September wholesale prices were 8.7 percent higher than in September 2007. That's down from the 9.8 percent year-over-year increase in July, the highest in 27 years.
Oil prices have dropped below $80 a barrel as the economy has slowed amid the financial crisis. The price of corn and other commodities are also down from mid-summer highs.
The drop in energy prices has hurt the shares of oil companies. Exxon Mobil Corp. shares closed Tuesday at $72.46 and Chevron Corp. finished at $68.54, both down from prices above $90 a share this spring.
Some of the drop in wholesale prices has been passed onto consumers. The consumer price index fell 0.1 percent in August, the Labor Department said last month. That was down from a 0.8 increase in July, when consumer prices were 5.6 percent higher than a year ago _ the largest jump in 17 years.
The department will release its CPI figure for September on Thursday. Economists expect it to increase by 0.1 percent.
