On a day when the investment community received a less-than-flattering report on October retail sales, we also learned that producer (wholesale) prices for the same month were down modestly. Specifically, the Department of Labor reported that the Producer Price Index for finished goods fell 0.2%. The primary catalyst was a nearly 2.2% drop in gasoline prices.

However, a closer examination of the pricing data paints a somewhat mixed picture. On the positive side, the decrease in finished goods prices was led by the index for finished energy goods, which fell 0.5%. Declines in home heating oil and liquefied petroleum gas prices were behind the tame energy costs. Conversely, prices for finished consumer foods rose 0.4%, up from the 0.2% advance registered in the prior month.  But most importantly, the index for finished goods less these two aforementioned volatile components fell 0.2% in October, which marks the first decline in the metric in 2012. Overall, prices for finished goods advanced 2.3% for the 12 months ended in October. While the rise was the biggest such increase since the 2.8% jump registered in March, the rate of advance was still well below the 5.8% gain booked in October of 2011. All in all, the component parts suggest that inflation is still very benign.     

The latest report is both a good and bad snapshot of current economic conditions. On the negative side, the data suggest that economic growth in this country is proceeding at a mundane rate right now, which is not surprising given today’s data on retail sales, the nation’s stubbornly high unemployment rate, and still far from impressive gains in manufacturing and non-manufacturing activity. Conversely, the retreat in prices suggests that inflation is not a big issue for the central bank at this moment and gives it the flexibility to continue its monetary policies, which includes an aggressive bond-buying program to support economic growth.

The latest wholesale pricing data offered no surprises, which in the eyes of the Federal Reserve has to be welcome news at this juncture. The tame inflationary pressures will allow the lead bank to continue its aggressive monetary policies to keep the economy moving forward, even if still at a rather pedestrian pace. We will get more insight on how the U.S. economy is faring this afternoon when the Federal Reserve releases the minutes from its latest Federal Open Market Committee meeting at 2:00 P.M. (EST). Investors should note that data on October consumer prices are due tomorrow at 8:30 A.M. (EST).

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.