U.S. producer prices were unexpectedly flat in October as a rise in the cost of goods was offset by declining services costs.
The Labor Department said on Wednesday that the unchanged reading in its producer price index for final demand last month followed a 0.3 % increase in September.
In the 12 months through October, the PPI increased 0.8 %, the biggest gain since December 2014. That followed a 0.7 % rise in September.
Economists polled by Reuters had forecast the PPI rising 0.3 % last month and accelerating 1.2 % from a year ago.
Longer-dated U.S. Treasury bonds erased losses after the report, while the dollar fell to session lows against the euro and the yen.
Goods prices, including energy, increased 0.4 % last month after rising 0.7 % in September. The cost of services declined 0.3 % after edging up 0.1 % in September.
Declining goods prices have been the main force keeping inflation benign. The drop has been driven by the a surge in the dollar from mid-2014 through January this year, as well a collapse in oil prices.
With the dollar's rally appearing to have peaked and oil prices having bounced off multi-decade lows, the disinflationary impulse is easing, which could allow overall inflation to gradually rise toward the Federal Reserve's 2 % target.
Inflation could push higher in the coming years if president-elect Donald Trump presses ahead with his agenda to boost infrastructure and defense spending at a time when the economy is expected to be at full employment.
Last month, energy prices rose 2.5 % after a similar gain in September. Wholesale food prices fell 0.8 % after rising 0.5 % in September.
The drop in prices for services last month was led by declining prices for the volatile trade services, which measure changes in margins received by wholesalers and retailers. They fell for a fourth straight month.
Healthcare costs increased 0.3 % last month after edging up 0.1 % in September. The cost of hospital care rose 0.3 %, adding to September's 0.4 % gain.
These healthcare costs feed into the Fed's preferred inflation measure, the core personal consumption expenditures index.
A key gauge of underlying producer price pressures that excludes food, energy and trade services dipped 0.1 % after rising 0.3 % in September.
The so-called core PPI increased 1.6 % in the 12 months through October, the largest rise since September 2014. That followed a 1.5 % increase in September.