U.S. wholesale prices remain subdued in November

By Lucia MutikaniReuters

U.S. producer prices fell for a third straight month in November, pointing to a lack of inflation pressure that could give the Federal Reserve pause as it weighs the future of its monthly bond purchases.

The Labor Department said on Friday its seasonally adjusted producer price index slipped 0.1 percent as gasoline prices maintained their downward trend.

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Prices received by the nation's farms, factories and refineries had dipped 0.2 percent in October.

Economists polled by Reuters had expected wholesale prices would be flat in November.

In the 12 months through November, producer prices increased 0.7 percent after rising 0.3 percent in October.

Wholesale prices excluding volatile food and energy costs nudged up 0.1 percent after rising 0.2 percent the prior month. In the 12 months through November, the so-called core PPI rose 1.3 percent after increasing 1.4 percent in October.

U.S. Treasuries prices extended earlier gains after the data suggested inflation may remain below the Fed's target and erode the case for withdrawing stimulus soon.

Despite signs of economic growth strengthening, there is little to indicate that will be accompanied by a pick-up in price pressures because of still-considerable labor market slack.

Persistently low inflation could complicate matters for the U.S. central bank, which is getting ready to start slowing the pace of its $85 billion monthly bond purchases. Some Fed officials have raised concerns about inflation being too low.

A steady flow of fairly strong data, ranging from retail sales to employment, has fanned speculation the Fed could start to ease back on stimulus as early as at its meeting next Tuesday and Wednesday.

Most economists, however, expect the Fed to hold off until January or March.

Last month, wholesale gasoline prices fell 0.7 percent, accounting for nearly three-quarters of the decrease in the energy index. Gasoline prices had declined 3.8 percent in October.

Wholesale food prices were flat after rising 0.8 percent in October. Higher prices for pork were offset by a record fall in bakery goods and the biggest drop in the prices for young chickens in nearly three years.

Passenger car prices fell 0.8 percent. They had increased 1.7 percent in October as new vehicle models were introduced. Light truck prices increased 0.6 percent after dipping 0.1 percent in October.

(Reporting by Lucia Mutikani; Editing by Krista Hughes)