Wholesale Prices Rise Hefty 0.9% : October Increase Biggest in 4 Years, Labor Dept. Reports

Associated Press

Wholesale prices, reflecting the end of cut-rate automobile financing and a big gain in food prices, registered a 0.9% jump in October, the biggest increase in more than four years, the Labor Department reported today.

The increase came despite fresh declines in gasoline prices.

Even with the big October increase, the largest since a 1.0% gain in April, 1981, the Producer Price Index for finished goods was still rising at a modest 0.9% rate for the first 10 months of 1985.

Indeed, analysts cautioned against reading too much into the October increase because it mostly reflects the turnaround in new car costs.


‘Pulse . . . Strong and Stable’

At the White House, presidential spokesman Larry Speakes commented:

“We still see no signs that the devastating double-digit inflation of the previous Administration should recur in the foreseeable future. The pulse of the nation’s economy remains strong and stable.”

In other government reports today, the Commerce Department said that:

--Industrial production remained frozen in October as strikes in the auto and defense industries held back manufacturing output.

The index of industrial production stood at 124.9 in October, no change from the September level when production had fallen a slight 0.1%. The October performance was a disappointment to analysts who had hoped for a big gain based on the fact that employment in manufacturing industries posted a gain of 60,000 jobs last month.

--Total business sales fell 0.5% in September as weakness in manufacturing and wholesale sales offset a rise in retail sales. The decline pointed up the sluggishness U.S. industry has been facing in recent months. An advance report released Thursday showed that retail sales fell a record 3.3% in October.

The report showed that business inventories were up 0.2% in September after dropping 0.3% in August.

Wholesale prices had dropped a sharp 0.6% in September, the third decline in four months, as auto makers discounted financing charges to spur sales at the end of the model year.


Most of those incentives were discontinued last month with the introduction of 1986 models, causing a big 5.1% jump in new-car prices.

“This is only a correction for the 0.6% drop in September. If you look at the two months together, we are still showing a flat wholesale price index,” said David Wyss, an economist with Data Resources Inc., an economic forecasting firm.

Food Prices Shoot Up

After two months of declines, food prices shot up 1.4% in October, the steepest gain in more than a year. Paving the way were an 11.8% jump in beef prices and a 9.9% rise in pork prices.

Poultry prices were up 3.1%, but fish prices were off 1.9%.

The costs of dairy products and fruits and vegetables were also off.

Energy prices overall fell for the fifth straight month. The 0.2% drop, however, was substantially below previous declines. Gasoline prices were off 0.9% after two consecutive months of 2.1% drops.