Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, March 16, 1991 TAG: 9103160133
SECTION: BUSINESS PAGE: A-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Also, output at the nation's factories, mines and utilities fell sharply for the fifth straight month, the worst string of setbacks since the last recession eight years ago, according to a new report.
"This is further evidence that the economy as of February was still in a full-fledged recessionary decline," said Robert Dederick, chief economist at the Northern Trust Co. of Chicago.
Economists had a mixed reaction to the 0.6 percent drop in the Labor Department's Producer Price Index, which measures price pressures before they get to the consumer level.
Over the past three months, wholesale prices have been falling at an annual rate of 4.8 percent, the fastest pace of decline since early 1986.
However, some analysts worried that the underlying inflation rate, absent the volatile energy and food sectors, climbed by 0.4 percent in February after rising an even faster 0.5 percent in January.
"If all you do is consume energy products, it was great," Dederick said. "But ex-food and energy, it came in disappointingly high."
Still, other analysts said the drop in energy costs, which has already filtered through to the retail level, was providing consumers with more disposable income. They predicted that other prices would start falling in the months ahead, reflecting the recession.
Allen Sinai, chief economist of the Boston Co., said he expected wholesale prices would rise by about 2 percent this year, far below the nine-year high of 5.6 percent set in 1990, a figure made worse by the steep jump in oil prices following Iraq's Aug. 2 invasion of Kuwait.
"I think we will see even lower numbers on inflation in the second half of the year. The drop in the inflation rate tends to lag the onset of a recession by about six months," Sinai said.
The February reduction was heavily influenced by a 5.1 percent plunge in energy costs, the biggest one-month decline since August 1989. Gasoline prices led the way, falling 11.5 percent after registering declines of 10 percent in January and 8.6 percent in December.
Home heating oil costs were down 8.3 percent last month while natural gas prices dropped 1.8 percent and electricity prices edged down 0.3 percent.
Food prices, which had fallen for two months, inched up 0.2 percent in February reflecting, led by a 7.7 percent rise in vegetable costs. The costs of fresh fruits, pork and processed turkeys were up as well. These gains offset price declines for eggs, down 6.7 percent, and beef, which edged down 0.9 percent.
The jump in the non-food and non-energy category was paced by a 1.2 percent rise in women's clothing costs. Among other items increasing were car prices, which rose 0.9 percent following an even larger 2 percent jump in January, and prescription drugs, up 1 percent for the third straight month. Computer prices, however, continued falling, down 0.9 percent after dropping 1.8 percent in January.
The Producer Price Index, before adjusting for inflation, stood at 121.2 in February compared to 117.4 a year ago. That meant that a marketbasket of goods which cost $117.40 in February 1990 cost $121.20 last month.
The government will release next Tuesday its Consumer Price Index for February. Analysts said they were looking for consumer prices to be up a modest 0.2 percent for the month as falling gasoline prices help out at the retail level as well.
by CNB