Cheaper gas drives wholesale prices down

A big decline in gas and energy costs drove a measure of U.S. wholesale prices lower in April. Outside that drop, prices barely rose.

The Labor Department said Friday that the producer price index dropped 0.2 percent last month from the previous month. It was the first decline since December and the biggest one-month drop since October.

Wholesale gas prices fell 1.7 percent last month. That accounted for half the drop in energy costs, which was the only major category to decline.

The index measures price changes before they reach the consumer,

For the 12 months that ended in April, wholesale prices have risen just 1.9 percent. That's the smallest 12-month change since October 2009. And it's down from a peak year-over-year increase of 7.1 percent last July, when higher gas and food costs pushed up wholesale prices.

Excluding volatile food and energy costs, the so-called core index rose 0.2 percent last month. The core index has increased 2.7 percent during the 12 months that ended in April, down only slightly from March.

Modest wholesale inflation reduces pressure on manufacturers and retailers to raise prices. That helps keep consumer prices stable, which boosts buying power and drives economic growth. Consumer spending makes up 70 percent of economic activity.

Lower inflation also gives the Federal Reserve room to hold interest rates at record-low levels.