Wholesale Price Decline Extends Into 4th Month

Wholesale prices, down four months straight for the first time in more than two decades, dipped 0.6% in April as the benefits from depressed world oil prices rippled through the economy, the government said today.

The decline, led by an 8.4% drop in energy prices, came amid indications that the skid may be ending. But the news for April was good: gasoline prices off 10.4%; heating oil costs off 8.7%; natural gas prices off 5.6%.

More good news: The Commerce Department said the lowest mortgage rates of the decade pushed housing starts up 4.1% in April, the fourth month that new construction has been above an annual level of 1.9 million units.

So far this year, wholesale prices overall have fallen at an annual rate of 11.1%, the steepest four-month fall recorded since such calculations began in 1947. Not since the period of December, 1962-March, 1963, have wholesale prices been off for such a long period.

Lowest Since November of ’83

At the White House, presidential spokesman Edward Djerejian commented that “the unprecedented assault on inflation now finds the index at its lowest level since November, 1983.”

Gasoline prices had fallen 21.9% in March. Home heating oil had been down 6% that month and 26.2% in February.

But analysts generally predict that oil and gasoline prices will begin slowly inching up in May--ending the record run of price drops as the peak travel period begins.

In other areas of the economy, there were signs of inflation.

Decline in Beef and Veal

Food prices inched up 0.1%, one-third of the March increase. Gains were posted for fresh vegetables, up 20.9%, and for poultry, up 3.6%. Beef and veal prices dipped 3.7%.

New car prices were up 1.6%.

All the figures in the Labor Department’s Producer Price Index are adjusted to remove seasonal factors.

In a separate report, low oil prices were cited as a reason that U.S. factories, mines and utilities operated at only 79.3% of capacity in April, the same level as March.

The Federal Reserve Board’s report indicated the operating rate is at its lowest level since December, 1983, reflecting the overall weakness in the industrial sector of the economy. Much of the slowdown in the operating rate stems from the drop in oil and gas exploration after the tailspin in petroleum prices, the government said.