Wholesale Prices Unchanged in January

Associated Press

Wholesale prices, aided by the steepest decline in energy costs in almost two years, showed no increase in January, the government said Friday.

Analysts said that even a substantial jump in citrus and vegetable prices expected next month because of winter freezes would not be enough to jolt the price picture expected for 1985.

Some economists predicted that inflation on the wholesale level will turn in an even better performance in 1985 than last year.

“This is another super low inflation report,” said Allen Sinai, chief economist for Shearson Lehman Bros., a New York investment dealer. “The strong dollar will keep wholesale inflation moderate in coming months.”


Energy Prices Off 2.4%

The January report showed across-the-board price moderation. Energy prices fell 2.4%, the biggest monthly decline since a 3% drop in March, 1983. Gasoline, home heating oil and natural gas all posted substantial price declines.

Food costs dropped 0.6% for their best showing since last May, with the cost of fresh vegetables, eggs, beef and poultry all showing declines.

The January survey was taken before the severe freeze devastated citrus and vegetable crops in Florida. Analysts said they expected sharp increases because of the freeze, but they explained that the overall inflation rate was not likely to be affected much.


Donald Ratajczak, head of economic forecasting at Georgia State University, predicted fruit and vegetable prices could rise by 20% in February but he said the overall inflation rate would remain modest, perhaps registering a 0.2% gain.

1.5% Annual Rise Seen

Ratajczak predicted wholesale prices for all of 1985 would increase by only 1.5%. This would better the 1.8% increase in the Labor Department’s Producer Price Index for all of 1984.

Analysts credit sagging world oil prices and the continued strength of the dollar for keeping the lid on prices. The strong dollar makes foreign goods cheaper for American consumers and forces U.S. producers to keep their own prices in line.

Treasury Secretary James A. Baker III told reporters Friday that the United States has intervened several times on foreign currency markets since he took office on Feb. 3 in efforts to keep the dollar from rising higher.

Despite the interventions, the dollar has set records against other foreign currencies for nine straight days, but it fell Friday, with analysts attributing the decline to profit-taking.

Industrial Output Up 0.4%

In another economic development, the government said industrial production rose 0.4% in January. The increase was led by strong gains in the production of automobiles, defense equipment and energy materials.


At the White House, presidential spokesman Marlin Fitzwater said both the inflation and production reports showed that the economy began 1985 in good position.

“The third quarter slowdown is clearly over and the economy appears to be on a steady growth path,” he said. “Steady growth with low inflation at the producer level is welcome news.”

The Labor Department’s Producer Price Index had risen 0.2% in December, following a 0.3% November gain. However, in both September and October, the index showed no increase at all.

If prices held steady for a full year at January’s level, wholesale costs would actually fall 0.4%. That figure is based on a more precise calculation of prices than the figure made public.