Producer Prices Inch Upward for 4th Month

The government said today that wholesale prices last month inched up 0.2% for the fourth consecutive monthly increase, suggesting a return of inflation to levels prevailing before world oil prices tumbled.

The November increase in the Labor Department’s producer price index is equivalent to an annual inflation rate of 2.5%.

But over the last 12 months wholesale prices have actually fallen 1.9%--most of that reflecting the more than 35% collapse of oil and gasoline prices that occurred earlier in the year.

Last month, energy prices overall held flat. Gasoline prices, after dipping 7.4% in October, rose 0.9% while home heating oil prices rose 1.8%. Natural gas costs fell 1.4%.

“The best news on inflation is now behind us,” said David Jones, chief economist for Aubrey G. Langston & Co., a New York government securities dealer. “We’re beginning to see the likelihood of some price acceleration. But it will be very moderate. There is still no excessive alarm about inflation.”

Earlier Increases

The November increase followed a 0.3% rise in October and 0.4% advances in August and September.

Increases last month were posted for a wide variety of goods, but they were moderated by a 0.1% overall decline in food prices. Food had risen 0.9% in October.

While a far cry from the double-digit inflation of the late ‘70s, prices probably will return to the 3.5%-4% range in 1987 at the consumer level and rise to about 3% at the wholesale level, private and government analysts are suggesting.

“We’re coming back to normal,” said Michael K. Evans, president of a private forecasting service. “The idea that lower oil prices were going to translate into lower prices in general (for the long term) is out the window.”

Sales Decline 1.6%

In a separate report, the Commerce Department said sales by U.S. businesses dropped 1.6% in October, pushing inventories up 0.6%, the steepest inventory accumulation in more than two years.

But analysts attributed both the dropping sales and increasing inventories to plummeting car sales in October after dealers halted special financing deals.

Wholesale prices for goods other than energy and food rose 0.3% in November after rising 0.8% a month earlier.