6-Month Wholesale Price Plunge Biggest on Record
Wholesale prices held steady in June but fell at an annual rate of 6.5% for the first six months of 1986, the largest half-year plunge since the government began keeping such records in 1947, the Labor Department said today.
The department’s producer price index showed no change from May, when a 0.6% rise broke a four-month streak of falling prices.
Even though the collapse of world oil prices that led to the plunge has pretty much run its course, today’s report showed little evidence of a return of inflation anywhere throughout the economy.
Analysts said the report further reflected current slackness of the U.S. economy.
‘Good News’
Presidential spokesman Larry Speakes called the wholesale price report “good news for all Americans.” He said the absence of higher prices would make lower interest rates possible, “and that in turn leads to sustained growth.”
But Sandra Shaber, director of consumer economics for Chase Econometrics of Bala Cynwyd, Pa., offered another view:
“If you’re talking about people as consumers, it certainly is good news. . . . But if you look at people as job holders, as employees, then it’s not such good news. Wages and salaries have been extremely weak this year.”
Gasoline prices moved up 2.9% in June, after an 8.6% surge in May. But other energy prices continued to fall--natural gas prices by 5.8% and heating oil prices by 6.8%.
Food prices were unchanged in June after a 1.1% rise in May. Vegetable prices fell 9.8%; egg prices were off 6.4%; beef and veal costs dipped 2.4%. Alcoholic beverage, soft drink and coffee prices all fell.
But these declines were offset by an 18.2% jump in fish prices, a 3% increase in poultry prices and a 5.2% gain in pork prices.
Auto prices, which had been rising steadily, slipped 0.2%.
The six-month drop in prices was the largest on record for finished goods at the wholesale level since 1947, when the Bureau of Labor Statistics first began recording them. The previous record was a 5.8% drop for the six months that ended in February, 1949.
Up 1.8% in 1985
In 1985, wholesale prices rose 1.8%, lagging behind consumer prices, which posted a 3.8% increase for the year.
Prices had fallen 0.7% in January, 1.6% in February, 0.9% in March and 0.6% in April before rising 0.6% in May. The March figure was revised from the previously reported 1.1% drop.
Jerry Jasinowski, chief economist for the National Assn. of Manufacturers, said: “The fact that producer prices are not increasing even after the exhaustion of the energy price decline indicates that there is considerable slack in the economy. The implication is that there is enough slack in the worldwide economy to prevent any immediate acceleration in inflation.”
