2019.02.1409:41:00UTC+00U.S. Producer Prices Unexpectedly Edge Lower In January

Reflecting steep drops in food and energy prices, the Labor Department released a report on Thursday showing producer prices in the U.S. unexpectedly edged lower in the month of January.

The Labor Department said its producer price index for final demand slipped by 0.1 percent for the second straight month in January. Economists had expected the index to inch up by 0.1 percent.

The unexpected dip in producer prices was partly due to the sharp drop in energy prices, which plunged by 3.8 percent in January after plummeting by 4.3 percent in December.

Food prices also showed a substantial pullback, tumbling by 1.7 percent in January after surging up by 2.6 percent in the previous month.

Excluding food and energy prices, core producer prices climbed by 0.3 percent in January after coming in unchanged in December. Core producer prices were expected to rise by 0.2 percent.

The increase in core prices came as prices for final demand services rose by 0.3 percent in January after showing no change in the previous month.

The Labor Department said prices for trade services advanced by 0.8 percent, accounting for over 80 percent of the total increase in prices for services.

Prices for transportation and warehousing services also climbed by 0.5 percent, while prices for other services were unchanged.

Reflecting the monthly decrease, the annual rate of producer price growth slowed to 2.5 percent in January from 2.8 percent in December.

The annual rate of growth in core producer prices also slipped to 2.6 percent in January from 2.7 percent in the previous month.

"With inflation contained, the Fed will be guided by the incoming activity data, which justify its 'patient' stance," said Michael Pearce, Senior U.S. Economist at Capital Economics.

On Wednesday, the Labor Department released a separate report showing consumer prices were unchanged for the third straight month in January.

The Labor Department said its consumer price index was unchanged in January, matching the revised reading for December. Economists had expected consumer prices to inch up by 0.1 percent.

Excluding food and energy prices, core consumer prices rose by 0.2 percent for the fifth consecutive month. The uptick in core prices matched economist estimates.

The Labor Department said the annual rate of consume price growth slowed to 1.6 percent in January from 1.9 percent in December, showing the slowest rate of growth since June of 2017.

Meanwhile, the report said the annual rate of core consumer price growth was unchanged from the two previous months at 2.2 percent.