U.S. wholesale prices registered the biggest decline in 20 months in December as oil prices dropped, the U.S. Labor Deparment said Friday,

Meanwhile, industrial production made stronger-than-expected gains last month as companies made greater use of capacity, and business expanded their inventories in November..

The Labor Department said its producer-price index for finished goods fell 0.7% in December, the biggest drop since April 2003, as energy prices fell 4%.

The core PPI, which excludes food and energy items, rose 0.1%, half the rate in November. Economists had called for a 0.2% decrease in the overall index and a 0.2% gain in core prices.

Over the course of 2004, wholesale prices rose 4.1%, the fastest pace in 14 years, the Labor Department said. Core prices showed a 2.2% increase in annual terms — the largest in six years.

In a separate release, U.S. industrial output rose 0.8% in December, the Federal Reserve said today, as most major industries saw production gains.

Industrial production grew 4.1% in both the fourth quarter and the full 2004 calendar year. That marks the first full-year expansion recorded since 2000. Industrial production was unchanged in 2003 and dropped the previous two years.

December industrial capacity utilization was at its highest level since January 2001. Utilization was reported at 79.2% last month, up from a revised 78.6% in November.
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Meanwhile, business inventories rose 1% to a seasonally adjusted US$1.275 trillion, after climbing a revised 0.4% in October, the U.S. Commerce Department said. Business sales rose at a much lower rate, up 0.4% in November, after increasing a revised 1.4% the previous month. Year over year, stockpiles rose by 7.9% from November 2003 to November 2004, with business sales up 10.6%.