The cost of goods leaving US factories fell again last month after April's record decline, sparking fears of deflation in the economy. The US Labour Department said its producer price index (PPI), a measure of wholesale prices, fell 0.3pc following April's 1.9pc decline, which was the biggest on record. The core rate, which excludes volatile food and energy prices, rose 0.1pc on the month and 0.2pc from a year earlier. Economists had expected PPI to fall 0.2pc and core PPI to rise 0.1pc.
US Federal Reserve officials had been predicting since the end of the war in Iraq that the economy would rebound in the second half of the year. However, Fed chairman Alan Greenspan has recently talked about the dangers of deflation, an unstoppable decline in prices that erodes corporate profits and stunts economic growth. Today's figures will add to the speculation that Greenspan may further cut US interest rates in an effort to keep the threat of deflation away and to spur consumer spending. ///www.fxcentre.com