Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, May 11, 1990 TAG: 9005110756
SECTION: NATIONAL/INTERNATIONAL PAGE: A/1 EDITION: EVENING
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The Consumer Price Index - what most people think of as inflation - has been worrisomely high. Prices in the first three months have advanced at a steep 8.5 percent annual rate, almost double the 4.6 percent price rise for all of 1989.
Meanwhile, the Producer Price Index has been relatively mild - except in January. A deep freeze around Christmas crimped vegetable and heating oil supplies, sending prices soaring 1.8 percent in January.
Wholesale prices were flat in February, fell 0.2 percent in March and another 0.3 percent in April. A steep drop in vegetable costs was credited with the April decline, which was the sharpest since August.
"They are no longer boxing tomatoes in Florida because the boxes are worth more than the tomatoes. . . . Thus the winter freeze is nothing more . . . than a bad memory," said economist Donald Ratajczak of Georgia State University.
Because of January, the annual rate for producer price inflation in the first quarter was a hefty 6.7 percent, but most economists believe by the end of 1990 the price gain will be about the same as the 4.8 percent in 1989.
Why the divergence between the two sets of numbers?
Economists say the consumer index is heavily influenced by the cost of services, which has been rising steadily; the producer index tracks only the price of goods, which have been held back by this year's economic slowdown.
The dampened growth of recent months has been pronounced enough to knock the wind out of sales, particularly for big-ticket items such as automobiles and furniture, and hold down prices.
But it hasn't been so pronounced that it has greatly affected employment. Despite a blip in April to 5.4 percent, the jobless rate remains near 15-year lows, keeping wages - and thus the cost of services - rising.
In a separate report today, the Commerce Department said retail sales last month slumped 0.6 percent, the third consecutive month without an increase.
by CNB