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U.S. producer prices fall more than expected in December

WASHINGTON (Reuters) – U.S. producer prices fell more than expected in December as the cost of energy products and food fell, providing more evidence that inflation is fading.

Producer Price Index Final demand fell 0.5% last month, the Labor Department said on Wednesday. Data for November was revised down to show PPI rising 0.2% instead of the previously reported 0.3%.

In the 12 months to December, PPI rose 6.2% after climbing 7.3% in November. Economists polled by Reuters had forecast PPI falling 0.1% on month and rising 6.8% year-on-year. December for the first time in over 2-1/2 years. Inflation is fading as the Fed’s fastest rate hike cycle since

cools commodity demand. That could further slow the pace of U.S. central bank rate hikes next month.

A 1.6% drop in commodity prices was responsible for the drop in PPI. Commodity prices rose 0.1 percent in November, dragged down by a 7.9 percent plunge in energy prices and a 1.2 percent drop in food prices.

Service prices edged up 0.1% after rising 0.2% in November.

Excluding the volatile food, energy and trade services components, producer prices rose 0.1% in December. Core PPI rose 0.3% in November.

In the 12 month to December, core PPI rose 4.6% after rising 4.9% in November.

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