Wholesale Prices Dip 0.4%--Fifth Decline of the Year

Wholesale prices fell 0.4% last month for the fifth decline of the year, the government reported today, but analysts said the economy remains stuck in neutral despite the low inflation figures.

The drop in the Labor Department’s producer price index was caused almost entirely by a 19.3% plunge in wholesale gasoline prices in July. Prices of nearly all other commodities rose, and food was up a sharp 1.9%.

Overall wholesale prices have declined at an annual rate of 6.2% this year, with drops posted in every month except May, when there was a 0.6% rise, and June, which showed no movement.

The July drop in gasoline prices followed a 2.9% rise in June and was the largest fall since a 22.0% decline in March.

‘They’re Back Up’

The report does not reflect the increase in prices that followed last week’s agreement by the Organization of Petroleum Exporting Countries to cut production, an action expected to boost retail gasoline prices a dime or more a gallon by summer’s end.

“It’s nice to know that gasoline prices went down for a month, but now we know they’re back up again,” said Mike Evans, president of a private economic forecasting service here. “I wouldn’t call that good news.”

July’s decrease of 0.4%, if continued for the next 12 consecutive months, would yield an annual rate of decline of 4.9%, Labor Department analysts said.

The rise in food prices was blamed on the drought in the Southeast.

The biggest increases were a 10.5% rise for poultry, a 6.4% gain for beef and a 5.1% rise for pork.

3.5% Hike in 12 Months

Food prices had shown no change the month before. Over the last 12 months, they have risen 3.5%.

During the same 12-month period, energy costs have fallen 36.2%. Goods other than food and energy, up 0.3% in July, advanced 21.3% over the year.

Private analysts agreed that inflation is still being held at bay, but they said the rest of the economy continues to be lethargic.

“Both food and energy have been subject to peculiar market forces in the last few months,” said Robert A. Gough Jr., a senior economist for Data Resources Inc. “The food increases will level off and the energy declines will not continue.”