U.S. wholesale inflation fell in March

U.S. wholesale inflation fell in March, largely reversing an early year run up, because the falling cost of gasoline more than offset rising food prices.

The producer price index, which measures how much manufacturers and wholesalers pay for finished goods, decreased a seasonally adjusted 0.6% from a month earlier, the Labor Department said Friday.

But so-called core prices, which strip out volatile energy and food components, rose 0.2% in March and food prices were up 0.8%.

The March increase in food prices could prove to be temporary. A Labor Department analyst said the nearly 22% increase in vegetable prices was largely due to weather in the Southwest. But java drinkers should be happy--wholesale roasted coffee prices are down 10% in the past year, the largest annual drop of any food category.

Economists had expected overall producer prices to fall 0.4% and core prices to move up 0.2%.

The overall index was held in check by declining energy prices. The wholesale price for gasoline dropped 6.8% during the month. The drop nearly entirely undid the prior month's gain and that appears to have already translated to consumers.

The average price for a gallon of gasoline fell during March and continued to slide early this month, according to Energy Information Administration data.

The annual rate of inflation at the producer level grew just 1.1% from the prior March, well below the Federal Reserve's 2% target.

Future price increases also do not appear to be in the pipeline.

Friday's report showed prices for intermediate goods--which are semifinished goods like lumber or flour that require further processing--fell by 0.9% in March. Prices of raw materials, known as crude goods, decreased 2.5%. Both declines were a result of lower energy prices.