Wholesale prices in the U.S. unexpectedly dropped in September as food costs retreated, an indication inflation remains tame.

The 0.1 percent decrease in the producer price index followed a 0.3 percent gain the prior month, a Labor Department report showed today. The median estimate in a Bloomberg survey of 80 economists called for a 0.2 percent advance. The so-called core measure, which strips out volatile food and fuel, increased 0.1 percent after being unchanged in August. Soft global demand has limited cost increases for raw and finished materials, restraining the pricing power of U.S. companies. That’s helping to hold the line on inflation, which the Federal Reserve sees running below its 2 percent objective in the near-term, giving policy makers room to maintain monetary stimulus when they meet this week.

“Demand in the economy remains subdued,” said Laura Rosner, a U.S. economist at BNP Paribas in New York, whose forecast matched the advance in the core price measure. “Firms are not exercising pricing power. Firms are competing by lowering their prices and competing for demand in the economy.”

Estimates in the Bloomberg survey ranged from a decrease of 0.2 percent to a 0.4 percent increase.
Core wholesale prices were projected to rise 0.1 percent after being unchanged the month before, the survey median showed. Another report showed retail sales outside of auto dealers climbed in September, indicating households were sustaining the economic expansion before the government shutdown shook confidence.

The 0.4 percent gain in purchases excluding vehicles followed a 0.1 percent increase in August and matched the median forecast of economists surveyed by Bloomberg, according to Commerce Department figures. Total sales dropped 0.1 percent, restrained by the biggest decrease at auto dealers since October 2012, as purchases early in the month were included in the August data.

Stock-index futures held earlier gains after the reports. The contract on the Standard & Poor’s 500 Index maturing in December rose 0.1 percent to 1,761.2 at 8:52 a.m. in New York.

The Labor Department’s report showed wholesale prices rose 0.3 percent compared with the same month a year before after a 1.4 percent rise. The core index increased 1.2 percent in the 12 months ended September, following a 1.1 percent gain.



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