December 20, 2005 8:50 AM, EST

Producer Price Index Falls 0.7%, Labor Dept. Reports

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he U.S. producer price index fell 0.7% in November, the biggest drop since April 2003, as energy prices fell, the Labor Department said Tuesday.

The November reading of prices paid to factories, farmers and other producers followed a 0.7 gain in October.

The so-called “core” PPI, excluding energy and food, rose 0.1% after falling 0.3%, Labor said.

Analysts expected the PPI to fall by 0.5%, while the core rate was expected to rise 0.2%, Bloomberg reported.

An increase in the PPI could indicate strong demand for goods, which would mean more shipments for trucking companies. However, if inflation begins to accelerate too quickly, it could also hurt the economy.

Energy prices declines 4%, the biggest drop in two and a half years, turning around a 4.1% gain in October.

rices of materials such as scrap steel and timber fell 1.2% after rising 6.7% in September. Excluding food and energy, core raw material costs rose 5.4%.

For the year, producer prices are rising at a 5.2% rate, compared with 5.1% for the same 11 months last year.