Wholesale prices post unexpected decline of 0.1% in February; retail sales fall

Wholesale prices posted an unexpected decline in February, providing some encouraging news on inflation as the Federal Reserve weighs its next move on interest rates.

The producer price index fell 0.1% for the month, against the Dow Jones estimate for a 0.3% increase and compared with a 0.3% gain in January, the Labor Department reported Wednesday. On a 12-month basis, the index increased 4.6%, well below the downwardly revised 5.7% level from the previous month.

Excluding food, energy and trade, the index rose 0.2%, down from the 0.5% gain in January. On an annual basis, that reading was up 4.4%, the same as in January. Excluding food and energy, PPI was flat, vs. the estimate for a 0.4% gain.

A 0.2% drop in goods prices helped fuel the headline decrease, representing a sharp pullback from the 1.2% surge in January. Final demand foods tumbled 2.2%, while energy declined 0.2%.

Most of the drop in goods stemmed from a 36.1% plunge in chicken egg prices, which had soared over the past year.

In a separate important data point Wednesday, the Commerce Department reported that retail sales fell 0.4% in February, according to data that is not adjusted for inflation. The total was in line with expectations and dragged down by a 1.8% slide in auto sales.

Food services and drinking establishments, which had seen strong receipts over the past year, fell 2.2% for the month, though they were still up 15.3% on an annual basis. Furniture and home furnishing stores were off 2.5%, while miscellaneous retailers saw a 1.8% decline.

Also, the Empire State Manufacturing survey for March, a gauge of activity in the New York region, posted a -24.6 reading, down 19 points from a month ago. The reading represents the percentage difference between companies reporting expansion versus contraction. The Dow Jones estimate was for a -7.8 level.

The big drop came from precipitous decreases in new…