Wholesale Price Index Tumbles at 12.4% Rate

From Times Wire Services

Wholesale prices fell at a whopping annual rate of 12.4% during the first quarter of 1986, the largest quarterly decline since the government started keeping the financial index in 1947, the Labor Department said today.

Plunging gasoline prices, down a record 21.9% in March, and home heating oil cost caused most of the severe drop.

The producer price index for finished goods fell 1.1% in March after a record 1.6% decline in February and a drop of 0.7% in January, according to a report prepared by the department’s Bureau of Labor Statistics.

March’s huge drop in gasoline prices dwarfed the 0.3% gain registered by food costs, their first rise this year.

Crude Oil Down 24.8%

The sharp drop in gasoline prices also served as an indication that the tapering off predicted by many analysts is still a way off at the nation’s gasoline pumps.


Indeed, prices for crude oil were off 24.8%, surpassing the record of 20.3% set just a month earlier.

In all, energy prices dropped 13.4% in March, yet another record in the Labor Department’s calculation of wholesale price trends, first kept in 1947. Home heating oil prices fell 6%, after a record 26.2% February decline. Natural gas prices, up in January and February, fell 0.6%.

As for food, the steepest increase came in vegetable prices, up 8.7%. Sharp increases were also posted for fruit, pork, poultry and eggs.

Importance Fading

If gasoline and other petroleum products hold at their current levels for several months, as most analysts believe, they will temporarily cease being a factor in the government’s producer and consumer price indexes.

But Donald Ratajcazk, a Georgia State University economist, noted before today’s report, “The deflationary pressures resulting from plunging oil prices have run their course.”

And Mike Evans, president of an economic forecasting firm, predicted, “We’re going to see some surprising inflation numbers in the second half of the year” if depressed energy prices post even modest increases.

“Even if the prices go up from $10 a barrel to $15, that’s a 50% increase,” he said. “All those bond traders who think inflation is licked forever may be in for a surprise.”