
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, April 11, 1991                   TAG: 9104110598
SECTION: BUSINESS                    PAGE: B-7   EDITION: EVENING 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

WHOLESALE PRICES FALL; SALES OFF

Wholesale prices, helped by further declines in gasoline and other energy products, fell in March for a fourth consecutive month, the first time that has occurred in five years, the government said today.

The Labor Department said the 0.3 percent drop in its Producer Price Index followed declines of 0.6 percent in both February and December and a 0.1 percent fall in January.

In another report today, the government said retail sales slipped 0.8 percent in March, their third loss in four months. The Commerce Department said sales totaled a seasonally adjusted $149.6 billion, down from $150.8 billion a month earlier.

The Bush administration is hoping that today's good news on inflation will prod the Federal Reserve to go further in its campaign to fight the recession by lowering interest rates.

However, private economists expressed doubts, noting that a sharp policy split may make it impossible for Federal Reserve Chairman Alan Greenspan to convince his colleagues to cut rates more.

Fed opponents of easing moves further argue that the central bank already has done enough to guarantee the end of a recession and that any additional easing runs the risk of making inflation worse next year.

The policy dispute has led Treasury Secretary Nicholas Brady and other administration officials to intensify their pressure on the central bank to be more aggressive in fighting the economic slump, arguing that a lack of growth is a far bigger problem facing the country than any distant threat of higher inflation.

Today's report was likely to bolster the administration's argument in one key respect. It showed that the underlying rate of inflation, after removing the volatile energy and food components, rose by only 0.2 percent in March, just half the February rate.

Sharp gains in the so-called core rate of inflation in both January and February had led to fears that inflationary pressures were building in a variety of areas outside of energy. However, the administration argued that the big jumps in the two previous months represented temporary factors.

The four consecutive months of declines marked the first time that has occurred since wholesale prices fell for four straight months in 1986. That decline also represented a reversal of a previous big run-up in energy prices.

The latest drop left wholesale prices falling at an annual rate of 3.9 percent for the first three months of this year. While analysts don't expect that to continue as energy prices firm up, they are looking for this year's overall price increase to be far below last year's 5.6 percent increase.

The bad news on inflation last year stemmed largely from the jump in world oil prices following Iraq's Aug. 2 invasion of Kuwait.

by CNB