Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, April 14, 1990 TAG: 9004140160
SECTION: BUSINESS PAGE: A5 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The Labor Department's Producer Price Index declined 0.2 percent last month after no change in February and a huge 1.8 percent gain in January, the largest in 15 years. Vegetables prices were down by 25.5 percent.
An unusually severe cold snap in late December, followed by unseasonably mild temperatures in January and February, caused the topsy-turvy price pattern. Fuel oil and vegetable costs rocketed in January.
Energy recovered a month later, but food prices didn't start their decline until March.
In a separate report, the Commerce Department said business inventories fell 0.4 percent in February while sales surged 1.3 percent.
That report was taken as a sign of economic vigor; rising inventories can signal a recession.
Analysts say more good news is ahead.
"Energy prices are still coming down and in fact we have a little more to go in vegetables. April should be a minus sign," said economist Donald Ratajczak of Georgia State University.
Excluding the food and energy gyrations, wholesale inflation has been remarkably stable for nearly two years. Economists look to these so-called "core" prices - up 0.3 percent in March and 0.4 percent in February - as a better barometer of underlying inflationary pressures.
They foresee little change, at least until next year. The Federal Reserve Board, they said, is keeping interest rates high enough to dampen both growth and price pressures but not high enough to derail the economy into a recession or substantially cut inflation.
"I think this year inflation is going to stay stuck," said economist James Annable of First National Bank of Chicago. "Without a recession, you can't bring down inflation quickly."
Prices rose 4.8 percent last year. Although the annual rate for the first three months of 1990 hit 6.7 percent, economists expect the wholesale inflation rate by the end of the year will come in close to last year's rate.
The March wholesale inflation report was better than expected. Most economists had predicted a slight increase of 0.1 percent or 0.2 percent.
Food prices dropped 0.6 percent in March, the sharpest decline since June.
Vegetables, particularly tomatoes, celery and cabbage, fell 25.5 percent, the biggest drop on record going back to 1967.
However, that marked only a partial recovery from gains of 23.3 percent in February and 58 percent in January.
Prices also fell for beef and veal, dairy products and coffee. They rose for eggs, rice, pasta, pork, chickens, turkeys, fish, soft drinks and cooking oils.
Energy prices overall dropped 2.4 percent in March after a decline of 5 percent in February and an increase of 13.6 percent in January.
Gasoline was down 2.8 percent and natural gas declined 2.5 percent. Fuel oil prices went up 10.6 percent, but they had fallen 30.2 percent the month before.
Clothing prices for men and children rose, while the cost of women's clothing fell. Passenger car prices, in the face of weak sales, declined 0.3 percent in March after no change in February and a 0.7 percent fall in January.
The various changes put the index for all finished goods, one stop short of retail, at 117 in March. That means a hypothetical selection of goods that cost $100 in 1982 cost $117 last month, up from $112.10 a year earlier.
Price pressures in earlier stages of the production process also eased in March. Intermediate goods showed no change, while crude goods fell 1.4 percent.
An example of the three processing stages would be bread for finished goods, flour for intermediate and wheat for crude.
by CNB