Wholesale Prices Rise a Scant 0.3% : Trade Imbalance Narrows Slightly to $13.3 Billion

Wholesale prices rose just 0.3% in May and the nation’s merchandise trade deficit narrowed slightly to $13.3 billion in April, the government reported today.

It also said business sales fell 0.3% in April while inventories rose by 0.2%.

The wholesale prices and trade reports indicate that while the weaker dollar finally is helping to ease the trade imbalance as intended, it also might not be creating as big an inflationary danger as some economists had feared.

But the combination of rising inventories and falling sales did add a negative note, indicating a likelihood of cutbacks in production and employment in the months ahead as manufacturers try to work down unwanted inventories.

$443.5 Billion in Sales

The Commerce Department said business sales totaled a seasonally adjusted $443.5 billion in April following a 0.4% rise in sales during March.

Inventories held on shelves and in back lots totaled $664.3 billion in April, with the 0.2% increase following a much larger 0.4% rise in March.

Meanwhile, the Labor Department said the 0.3% rise in its producer price index was the smallest since a 0.1% gain in February and was down sharply from the 0.7% jump of April.

Higher food prices--led by a jump in meat prices--accounted for the May increase, with a 1.4% rise in that area offsetting price declines for a wide range of goods and unchanged energy prices.

2nd Consecutive Decline

The trade report by the Commerce Department marked the second consecutive monthly decline in the imbalance between imports and exports. The $312-million drop from the March deficit of $13.6 billion was not a major change, but many analysts had been expecting the imbalance to rise sharply.

The April deficit narrowed as imports declined more quickly than did exports.

The Reagan Administration in September, 1985, launched a coordinated program with other major industrialized countries to push the value of the dollar lower as a way of reducing the trade deficit.

Since that time, the dollar has declined by about 35% against a trade-weighted group of currencies. While the weaker dollar appears to be finally cutting the trade deficit, it has also been blamed for boosting inflation in this country and triggering a rise in interest rates.

Economic Growth Hurt

Administration officials have maintained that they had no choice but to devalue the dollar in order to correct a trade deficit which has cut deeply into economic growth in the United States.

The improvement in the April trade figures came from falling imports which offset a decline in exports.