Wholesale Prices Up 1.8% in ’85 : U.S. Marks Lowest 3-Year Inflation Rate in 20 Years

Wholesale prices rose a modest 1.8% in 1985, giving the nation its lowest three-year inflation rate in 20 years, the government said today.

In December, the Labor Department said, wholesale prices rose just 0.4%, a marked slowdown from the 0.9% recorded in October and the 0.8% posted in November. Much of the credit for the December rate went to an easing in the rates of increase for food and gasoline prices.

For 1986, economists predict a slight upward creep in wholesale prices as inflationary pressures caused by a declining dollar and an edging up of farm commodity prices are expected to offset declining oil prices.

At the White House, presidential spokesman Larry Speakes called the wholesale price report “a remarkable record of low inflation.”

With oil prices falling, Speakes said, “there should be no near-term big increases in finished energy prices over the coming months. That should be joined by reduced auto prices, thanks largely to manufacturers’ incentive programs.”

Last year’s increase, while up from the 0.6% and 1.7% increases recorded in 1983 and 1984 respectively, was still far below the rates posted through the 1970s and early 1980s.

Slowdown in Food Prices

Last year’s moderate overall rate was largely the result of a slowdown in food price increases. Those prices rose only 0.3% after climbing 3.5% in 1984. Food prices actually declined in six months of last year.

In December, food costs were up 0.8% after a 1.6% November rise.

Despite the overall good showing for food costs, prices of fresh vegetables rose 12.3% for the year.

Gasoline prices were up 3% for the year. For December, the pick-up was 2.8%, down from November’s 3.7% and reflecting in part the collapse in oil prices that resulted from a chaotic meeting of the Organization of Petroleum Exporting Countries.

Crude oil prices fell 4% for all of 1985. Analysts expect even further cuts to work their way to the nation’s gasoline pumps.

Department analysts noted that, if the effects of food and energy prices were removed from the overall calculation, wholesale prices would have held steady in December, with declines in the costs of cars and prescription drugs offsetting gains in prices for clothing, tobacco, cosmetics, costume jewelry and light trucks.

Beef, Coffee, Natural Gas

The Labor Department offered these specifics on December wholesale price activity:

--Beef prices, which had surged 11.8% in October and 4.5% in November, fell 0.7% last month. Fish prices rose a moderate 1.9% after a jump of 12.6% in November.

--Coffee prices rose 3.3%, largely because of a Brazilian drought. Prices fell for poultry, off 0.5%, and pork, down 1.1%.

--Natural gas prices dropped 1.7%, the third straight monthly decline. Fuel oil prices rose 1.5%, down from November’s 7.8% surge in a further reflection of the disarray in OPEC.

Changes that show up in the wholesale price measure are a good barometer of how food, energy and other prices will move at the retail level. But the consumer price index, due out later this month, checks a broader range of items.