The Labor Department said Friday its producer price index, which measures inflation pressures before they reach consumers, dropped 0.5 per cent in February. The figure follows a 0.8 per cent fall in January, which had been a record decline in a government series that goes back to 2009.
Core producer prices, which exclude volatile food and energy costs, also fell 0.5 per cent during the month. Over the past 12 months, producer prices have shed 0.6 per cent while core prices have climbed a modest 1 per cent.
Since last year inflation since has moved even farther below the Federal Reserve's goal of seeing prices rise about 2 per cent annually.
Food costs were down 1.6 per cent in February. Energy costs overall were flat as declines in natural gas and electric power combined with a gain in gasoline, which rose 1.5 per cent.
Gasoline prices had been falling since the middle of last year and hit a six-year low in January of $2.03 a gallon, according to AAA. But since gas prices have risen since then, with the nationwide average for a gallon of regular now at $2.45, up from $2.23 a month.
Robust hiring in the past 12 months and lower gas prices lifted consumer confidence in January and February to its highest levels since the recession. But those trends have yet to boost consumer spending this year, a key driver of economic activity. The government reported that retail sales fell for a third month in a row in February as harsh winter weather depressed shopping.
But many analysts look for those declines to reverse in the coming months. The economy is expected to turn in its strongest growth this year in a decade while overall inflation stays modest.
When the Federal Reserve meets next week, it's likely that officials will drop language that they plan to be "patient" before starting to raise a key interest rate from a record low. But economists project that the Fed won't actually raise rates until at least June and possibly September or later because it remains concerned about low inflation.