Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, March 15, 1991 TAG: 9103150878
SECTION: NATIONAL/INTERNATIONAL PAGE: A/1 EDITION: EVENING
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The Labor Department said the February decline in its Producer Price Index, which tracks inflation one stop short of retail, followed drops of 0.1 percent in January and 0.6 percent in December.
That means wholesale prices have fallen at an annualized rate of 4.8 percent over the past three months, the biggest three-month price decline at the wholesale level since early 1986.
That represented a sharp turnaround from the 5.6 percent wholesale inflation rate for all of 1990, the worst showing in nine years.
Because of favorable developments with world oil prices even before the end of the Persian Gulf War, economists are looking for inflation, at both the wholesale and retail level, to be much more moderate this year.
The 0.6 percent February decline, if it continued for 12 months, would translate into a 6.7 percent annual rate of fall. Economists are Economists are looking for inflation, at both the wholesale and retail level, to be much more moderate this year. not looking for that good a price performance this year, but they are forecasting a very modest rise of around 1 percent.
The Bush administration is counting on moderate inflation this year to give the Federal Reserve maneuvering room to cut interest rates further in an effort to get the country out of a recession.
Some analysts said the surprisingly good February wholesale inflation report might be enough to prompt a further cut, but others said they expected the central bank would hold off on any further credit easing to see how consumer and business spending responds following the end of the Persian Gulf War.
The good news on wholesale prices was dominated by a 5.1 percent fall in energy costs, the biggest one-month decline since a 6.7 percent drop in August 1989.
For February, the falling energy costs were led by an 11.5 percent plunge in gasoline costs. Gasoline prices had dropped 10 percent in January and 8.6 percent in December.
Home heating oil costs fell 8.3 percent last month while natural gas prices dropped 1.8 percent.
Residential electricity prices, which had risen 2.5 percent in January, edged down 0.3 percent in February.
Food prices, which had fallen for two months, edged up a small 0.2 percent in February.
Excluding the volatile food and energy categories, wholesale prices rose 0.4 percent last month, down slightly from 0.5 percent rise in January.
by CNB