Prices fell for manufacturers, farmers and other producers in September, as lower energy costs limited broader inflation.
The Labor Department said Wednesday that the producer price index, which measures price changes before they reach the consumer, dropped 0.5 percent last month after being unchanged in August. Excluding the volatile food and energy categories, core prices tumbled 0.3 percent in September.
All of this suggests that the Federal Reserve may delay on an expected rate hike until signs of inflation appear.
"The economy is stuck and deflation pressures are the key risk," said Steven Ricchiuto, chief economist at Mizuho Securities.
Wholesale prices have decreased 1.1 percent from a year ago, with September marking the eighth straight 12-month decline. Gasoline costs fell a sharp 16.6 percent, while food prices slid 0.8 percent.
Consumer prices, meanwhile, have barely risen. According to the Federal Reserve's preferred measure, they increased just 0.3 percent in August from a year earlier. Excluding the volatile categories of food and energy, core prices have risen a gentle 1.3 percent in the 12 months ending in August.
Those inflation figures are far from the Fed's 2 percent inflation target, a gap that could cause Fed policymakers to postpone a rate hike at their Oct. 27-28 meeting. Many analysts had anticipated that the Fed would increase short-term interest rates at its September meeting for the first time in nine years. But the U.S. central bank held off amid concerns about China's economy growing at a slower pace and sharp volatility in the U.S. stock market.
The Fed has said that it needs to feel "reasonably confident" that inflation will move back to its 2 percent target before beginning to raise interest rates. The short-term rate it controls has been pegged at a record low near zero since late 2008, in an effort to spur borrowing and spending amid the Great Recession and ensuing recovery now entering its seventh year.
Falling gas prices, in addition to a stronger dollar which lowers the cost of imports, are keeping overall inflation at bay. A gallon of gas cost an average $2.31, about 89 cents cheaper than a year ago.