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

DATE: SATURDAY, February 12, 1994                   TAG: 9402120030
SECTION: BUSINESS                    PAGE: A-4   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

PRICES UP, SALES DOWN, BUT DON'T FRET

The Labor Department said Friday its Producer Price Index rose 0.2 percent, including the largest increase in gasoline prices in more than three years. The index measures inflation pressures before they reach the consumer.

But while the cost of gasoline helped drive up energy prices, the cost of food fell for the first time in three months. And analysts at Merrill Lynch & Co. said energy prices have since declined.

"The producer price data indicate that predictions of inflation's resurgence are greatly exaggerated," said Ron Schreibman, vice president of the National Association of Wholesaler-Distributors.

"Most prices remain well behaved despite the economy's expansionary movement," he added. "By and large, wholesalers are telling us that price increases from their manufacturing suppliers aren't sticking."

In December, wholesale prices fell 0.1 percent, the sixth time in eight months they either dropped or showed no gain.

The Commerce Department said retail sales declined 0.5 percent in January, the first drop since 1 percent in March. But analysts blamed inclement weather that kept shoppers at home.

Sales totaled a seasonally adjusted $181 billion, down from a revised $182 billion in December, which included the holiday shopping season.

Lynn Reaser, an economist with First Interstate Bancorp in Los Angeles, said housing activity was hurt by the weather. That, in turn, crimped sales of building materials and home furnishings.

Automobile sales also were down, she said, as consumers delayed big-ticket purchases in general. And weather forced many to eat at home, causing a drop in sales at restaurants and bars.

"Consumers also apparently were consolidating their purchases by going to general-merchandise or department stores as opposed to specialty and apparel stores," where sales were off, she said.

The department also said sales were stronger than first thought in both December and November - up 1.2 percent in December, rather than 0.8 percent as initially estimated, and 0.7 percent in November, instead of 0.3 percent.

Gasoline prices shot up 6.5 percent after two straight months of big declines. That helped boost overall energy costs 0.8 percent despite drops of 1.2 percent in heating oil and 0.9 percent in natural gas.

Food prices fell 0.3 percent, the biggest drop since June. This reflected a 16.5 percent decrease in vegetable prices, the biggest since June 1983. Vegetable prices had been racing upward the past two months because of shortages caused by the weather.

Excluding the volatile energy and food categories, core prices rose 0.4 percent in January, a gain in line with expectations.