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With energy prices falling sharply, the Labor Department released a report on Thursday showing a modest decrease in U.S. producer prices in the month of March.
The Labor Department said its producer price index for final demand dipped by 0.2 percent in March after sliding by 0.6 percent in February. Economists had expected prices to drop by 0.4 percent.
The decrease in producer prices came as energy prices plummeted by 6.7 percent in March after plunging by 3.6 percent in February.
Meanwhile, the report said core producer prices, which exclude food and energy prices, rose by 0.2 percent in March after slipping by 0.3 percent in February. Core prices were expected to show no change.
The uptick in core prices came as prices for services edged up by 0.2 percent in March following a 0.3 percent dip in the previous month.
Prices for trade services, which measure changes in margins received by wholesalers and retailers, surged up by 1.4 percent during the month.
On the other hand, prices for demand transportation and warehousing services plunged by 3.3 percent, while prices for other services were unchanged.
The report said the annual rate of producer price growth slid to 0.7 percent in March from 1.3 percent in February, but the rate of core producer price growth was unchanged at 1.4 percent.
"Looking ahead, the severe demand shock from COVID-19, the collapse of oil prices and the stronger dollar will overshadow the impact from supply disruptions and exert strong downward pressure on prices," said a note from economists at Oxford Economics.
They added, "This will reinforce the Federal Reserve's 'whatever it takes' policy stance as the economy plunges into a recession."
The Labor Department is scheduled to release a separate report on consumer price inflation in the month of March on Friday.
Consumer prices are expected to dip by 0.3 percent in March after inching up by 0.1 percent in February, while core prices are expected to creep up by 0.1 percent after rising by 0.2 percent.
