Economists had forecast the PPI rising 0.2 percent last month and falling 0.8 percent from a year ago.
A drop of 0.7 percent in the index for final demand goods accounted for more than 70 percent of the decline in the PPI last month. Energy prices fell 2.9 percent after rising 1.5 percent in March. Food prices fell for a fifth straight month.
The dollar, which has gained about 11 percent against the currencies of the United States' main trading partners since June, and lower energy prices are keeping inflation subdued.
That, together with signs of a modest rebound in economic growth after a dismal first quarter, suggest the Fed should be in no rush to start tightening monetary policy. Most economists do not expect the U.S. central bank to hike rates before September.
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The Fed, which has a 2 percent inflation target, has kept its key short-term interest rate near zero since December 2008.
Last month, the volatile trade services component, which mostly reflects profit margins at retailers and wholesalers, fell 0.8 percent after slipping 0.2 percent in the prior month.
A key measure of underlying producer price pressures that excludes food, energy and trade services ticked up 0.1 percent after rising 0.2 percent in March.