Wholesale Prices Plunge; Dow Rockets Up 39 Points : Biggest Cost Drop on Record
Collapsing world oil prices helped push down wholesale prices in February by 1.6%, the largest monthly decline since the government began keeping track of the figures in 1947, the Labor Department reported today in Washington.
Stock prices soared again in New York today, closing out one of the biggest weeks yet in a rampaging bull market. The Dow Jones average of 30 industrials closed up 39.03 at a record 1,792.74.
New York Stock Exchange volume was about 181.87 million shares compared with 171.48 million shares Thursday.
Analysts said the latest upsurge was inspired in part by dramatic new evidence of the decline of inflation.
Trading was so heavy late in the session that final statistics on New York Stock Exchange activity were delayed.
The drop in the producer price index followed a 0.7% decline in January, after it had climbed sharply in the last three months of 1985.
The decline was largely due to plummeting prices of gasoline and other petroleum products. However, food prices also showed sharp declines.
White House spokesman Larry Speakes said, “This decline in prices at the wholesale level will send a strong message to the overall economy: Consumer prices are coming down, and the fears of inflation have all but abated.”
Heating Oil Off 26.2%
Gasoline prices fell 11.1%, after a 5.7% decline in January. Home heating oil dropped 26.2%, after falling 10.8% in January. These declines were also the largest recorded in the department’s 39-year history of keeping track of producer prices.
February’s decline, if continued for 12 straight months, would be equal to an annual compounded decrease of 17.1%, department analysts said.
Wholesale prices over the last 12 months have declined 0.1%, the department said.
In a separate report issued today, the Federal Reserve Board said U.S. industrial production plunged 0.6% in February, one of the weakest showings since the end of the last recession.
Part of the decline was due to a sharp 3% drop in mining activity--a direct result of curtailed oil and gas drilling brought on by the plunging oil prices.
Also today, the Commerce Department announced that manufacturers and trade inventories were valued at $588.1 billion at the end of January, a 0.7% rise over the previous month.
Largest Since August, 1984
It was the largest month-to-month rise since August, 1984, when inventories grew by 0.8%.
Retailers increased their inventories by 2.9%, wholesale inventories by 1.4%.
The rise in retail inventories was the largest since October, when they rose by 2.7%.
During January, food prices after seasonal adjustments declined 1.6% after moving down 0.4% in January. One of the biggest drops came in vegetable prices, which dropped 23.2% after a 9.7% drop in January.
Coffee prices continued to rise because of a drought in Brazil, but by only 6.3%, a lesser increase than January’s 17.4% surge.
Prices for beef and veal, pork and eggs fell in January, while prices for soft drinks climbed 1.2%.
Auto Prices Edging Up
Meanwhile, automobile prices, down at the beginning of the year because of cut-rate financing deals, began to edge up again, by 0.4% in February.
Changes that show up in the producer level are a good barometer of how food, energy and other commodity prices will move at the retail level. A report on retail prices in February is due March 25.
