Prices Take Sharpest Drop in Over 36 Years

Associated Press

A record plunge in gasoline costs last month pushed consumer prices down 0.4%, matching the February drop for the steepest back-to-back declines in more than 36 years, the government said today.

For the first three months of the year, consumer prices fell at an annual rate of 1.9%, the best quarterly performance since 1954.

Prices have not fallen for two months running since 1965 and have not fallen at such a steep pace since matching 0.4% declines in December, 1949, and January, 1950.

(In the Los Angeles area, consumer prices rose 0.5% in March, pushed up by higher housing costs that were running 8% above year-ago levels and by rising medical care costs, officials said.)


White House spokesman Larry Speakes said the price declines nationwide “will add considerably to real consumer purchasing power. There will be more money in Americans’ pockets to buy more goods and services at lower prices.”

12% Gasoline Drop

Most of the March decline was attributed to a record 12% plunge in gasoline prices, more than double the 5.9% February drop.

Gasoline prices are tumbling because of the worldwide slump in oil prices. Oil on the spot market is now selling for $12 to $13 a barrel, less than half the cost just six months ago.

Gasoline prices at the pump are at well below $1 per gallon for all grades in much of the country. These prices, last seen in 1979, represent a 27% drop from the peak prices of March, 1981.

Economists say they expect that gasoline costs will probably post further declines in April and May before leveling off.

April Repeat Expected

“We expect the consumer price decline for April to be similar to March, a big drop with energy prices by far the biggest factor,” said Donald Ratajczak, head of the economic forecasting unit at Georgia State University. “We think consumer energy prices will bottom out by the end of June. We don’t see them continuing to collapse.”


Reflecting the sharp drop in crude oil prices, the average cost of all energy commodities declined at a remarkable annual rate of 52.3% in the first three months of the year.

Home heating oil costs were down 6.5% last month after a record 11.5% February decline and were also 27% below their peak, set in April, 1981.

Electricity, Gas Down

Natural gas prices fell 0.7%; electricity costs were off 0.5%.


Food prices, which fell a sharp 0.6% in February, edged upward 0.1% last month. Beef, pork and poultry prices all declined while prices for fresh vegetables rose 0.3%.

If the overall March decline held for 12 months, the annual rate of inflation would be minus 5.4%. For all of 1985, consumer prices posted a 3.8% increase.

In a separate report today, the government said orders to U.S. factories for “big ticket” durable goods plunged 2.5% in March, despite a big surge in orders for military hardware.

The decline in orders for durable goods, items expected to last three or more years, was the largest since a 2.9% drop in March, 1985.