Wholesale Prices Hold in June; Sales Off
Wholesale prices were unchanged in June, halting a string of four straight months of increases, as the inflation rate was held down by a steep drop in energy prices and another decline in food prices, the Labor Department said Friday.
The Commerce Department, meantime, reported that sales by the nation’s retailers--a report covering a broad range of merchants from gas station operators to restaurateurs--fell 0.8% last month, the steepest slide in 11 months.
Those figures were in line with industry reports Thursday of weak merchandise sales last month for the nation’s retailers, reflecting sluggish consumer demand and unseasonably cool weather.
In Friday’s inflation report, the government said that with wholesale prices flat in June, the increase for the first six months of the year was a modest annual rate of 1.4%, against 2.8% in the same 1984 period. In all of last year, wholesale prices were up 1.8%.
Energy prices, which rose 5.8% in April and increased 3.4% in May, dropped 2% in June, the report said. In that component, wholesale gasoline prices nudged up 0.4% in June after a 3.8% increase in May and a 9.5% upward spurt in April.
Analysts said last week that Mexico’s decision to cut oil prices has pushed OPEC another step closer to reducing its official oil prices for the second time this year and would put downward pressure on prices of petroleum products.
Stocks Hit Record High
Meanwhile, the stock market used a moderate gain to reach record highs last week. The Dow Jones average of 30 industrials rose 4.81 to an all-time high of 1,337.70, surpassing the peak of 1,337.14 it reached July 1.
But bond prices tumbled further late Thursday after the Federal Reserve reported an unexpectedly large late-June increase of $4 billion in the nation’s basic money supply.
Sears, Roebuck & Co., the nation’s largest general retailer, and third-ranked J.C. Penney Co. each reported sales declines of 1.5% for the five weeks that ended July 6.
K mart Corp., ranked second, reported a gain of 8.4%. But sales for stores that were open more than a year--called same-store sales--fell 1.3%, it said.
Jeffrey Edelman, a retail analyst with Dean Witter Reynolds Inc., said that a year ago, stores had heavy inventories and were cutting prices aggressively to move merchandise, which helped bolster sales.
But this year, “with inventories more aligned with sales, they are not promoting as aggressively,” he said.
Effect of Weather
Sears Chairman Edward Telling said cooler weather in many states in June adversely affected sales of air conditioning and other weather-related merchandise.
The relatively low temperatures also discouraged consumers from buying summer apparel, which will be marked down in July, said Jeffrey Feiner of Merrill Lynch & Co.
Mexico’s decision to cut oil prices indicated Mexico does not expect OPEC’s oil ministers will be able to bolster prices at their next meeting, scheduled for July 22, said Paul Mlotok, an oil analyst at the investment firm Salomon Brothers Inc.
Lower Mexican Prices
The Mexican oil monopoly Pemex last week cut the price of its light Isthmus grade of oil by an average of $1.24 a barrel. The former price was $27.75 a barrel. It said the price of heavy Maya crude, which was cut $1.50 a barrel last month, was lowered again, by an average 77 cents a barrel. The previous price was $24 a barrel.
Mexico’s action, following earlier cuts by Britain, Norway and the Soviet Union, shows the “market is pulling prices down and OPEC has been ineffective in stopping the erosion,” said Lawrence Goldstein, executive vice president of the Petroleum Industry Research Foundation, a New York study group.
In another development last week, assets of the nation’s 347 money-market mutual funds rose $876 million, halting a two-week, $8-billion plunge, the Investment Company Institute says.