Wholesale Prices Up Only 0.2% in March : Moderate Rise Is the Steepest So Far This Year

Wholesale prices rose a moderate 0.2% last month, the steepest increase so far in 1985, the government said today. Over the last year, however, prices at wholesale have been up 0.3%, the smallest 12-month inflation rate in 20 years.

In March, a hodgepodge of increases more than wiped out lower prices for gasoline and food, which was down overall despite a 16.7% gain in vegetable prices.

The March rise followed a 0.1% decline in February. Prices had held steady in January.

For the first three months of the year, wholesale prices were up just 0.3%, at an annual rate. That rate held true for the last year as a whole and was the lowest since a 0.1% rate for the 12 months ending in January, 1965.

Seasonal Adjustment

The 0.8% gasoline price decline was the product of the Labor Department’s seasonal adjustment process, designed to remove predictable, periodic influences from price activity. Without the adjustment, prices at the pump actually rose 1.7%.

Analysts, however, expect pump prices to begin falling before long as pressure builds from the worldwide oil glut.

Indeed, many analysts predict that inflation for all of 1985 could be as low as 2%, only a slight deterioration from the 1.8% gain recorded in 1984.

In other economic news today, the government said sales of manufactured goods rose a slight 0.2% in February after a 0.7% decline in January. Business inventories climbed an even faster 0.4% in February.

Big Rise in Vegetables

As for March, the department offered these specifics on wholesale price activity:

--Food prices overall fell 0.2%, the third monthly decline. The drop came despite the big rise in vegetable prices, which was almost four times the 4.6% gain of the preceding month.

--Energy prices overall fell 0.9%, the fourth straight monthly decline. Natural gas prices were off 2.5% but home heating oil costs rose 0.6%.

The energy price calculations reported today were actually for February. That component of the wholesale measure lags a month because energy companies report their prices too late for inclusion in the most recent index.

--New-car prices were up 0.3%, the smallest rise this year.

--Capital equipment costs gained 0.4%.

The overall rise was also propelled by price gains of 1.1% for newspapers, 1% for automobile tires, 0.6% for furniture and 0.5% for women’s and children’s clothing.

Worldwide Oil Demand

The optimism about overall future price moderation is based in part on the fact that worldwide oil demand is well below the production capacity of the oil-exporting nations and will probably remain so for some time.

In addition, the dollar, while retreating somewhat from the records set in February, remains at high levels. By one measure, the dollar has risen about 70% since the end of 1980 against a trade-weighted group of foreign currencies.

The strong dollar holds prices down, especially in a commodity index such as the wholesale price measure, by making imported goods cheaper for Americans. At the same time, U.S. producers are constrained from raising their prices for fear of losing even more business to foreign competition.