Wholesale inflation unexpectedly tumbles 0.5% in October, biggest drop in 3 years

Inflation at the wholesale level posted a surprise decline in October, the latest sign that high consumer prices are beginning to loosen their stranglehold on the U.S. economy.

The Labor Department said Wednesday that its producer price index, which measures inflation at the wholesale level before it reaches consumers, tumbled 0.5% in October from the previous month. On an annual basis, prices remain up 1.3% – a sharp drop from the 2.2% recorded in September.

In another sign that suggests high inflation is beginning to dissipate, core prices – which exclude the more volatile measurements of food and energy – were unchanged for the month. That is lower than both the 0.3% estimate and the reading recorded last month. 

The figure was up 2.4% on a 12-month basis.

The data comes a day after the Labor Department reported that the consumer price index, which measures the prices paid directly by consumers, eased more than expected in October. 

The back-to-back inflation reports will have major implications for the Federal Reserve, which has raised interest rates at the fastest pace in decades as it tries to cool the economy. The central bank approved 11 rate hikes over the course of 16 months, lifting the federal funds rate to the highest level since 2001.