Wholesale Prices Dip .2% in February : Lettuce Tumbles 70%; Energy, Food Costs Pace Overall Decline

Wholesale prices dipped 0.2% in February as both energy and food costs declined, including a dramatic 70% tumble in the price of lettuce, the government reported today.

The decline in the Labor Department’s producer price index partially erased a 0.4% increase in January. Analysts said it provided further evidence that inflation remains tame.

For the first two months of 1988, wholesale prices have been increasing at an annual rate of 1.1%--just half of last year’s 2.2% rise.

However, the producer index does not show two categories in which price increases have been the most pronounced--services and imported goods. These items are included in the companion consumer price index, which was up 4.4% in 1987.

At the wholesale level, food prices overall fell 1.1% after a 1.7% rise a month earlier. Energy prices were also down, but the 0.8% decline trailed January’s 4.5% drop.

Gasoline prices fell 0.5% after an 8.4% plunge in January. Home heating oil costs were off 4.2% after a 6.2% drop. Natural gas prices, up 0.8% in January, fell 1.4%.

As for food, vegetable prices, which had increased 16.2% in January, dropped 26.3%, a decline largely driven by the drop in lettuce prices. The price of lettuce had tripled between October and November because of shortages and crop infestation in California.

Fruits Also Down

Fruits, down 3% in January, fell an additional 3.5%.

Beef and veal prices were up 0.3% after a 3.4% rise in January. Pork costs, up 13.2% in the previous month, rose just 0.2%.

Coffee prices fell 0.8% for the second consecutive month. Alcoholic beverage costs were up 0.8% after rising 0.1% in the preceding month.

Subtracting the usually volatile energy and food categories, wholesale prices for all other goods increased a relatively sedate 0.3%.

“The stability which we continue to see in the (producer) index is very good news,” said Dirk Van Dorgen, president of the National Assn. of Wholesaler-Distributors. “We don’t need to have to cope with a vexing inflation problem on top of all the other basic economic problems we’ve got to deal with.”

The teaming up of lower energy and food costs in February “really was a break for the consumer,” said Sandra Shaber, senior economist for the Futures Group, a management consulting company. “But there have been some strong increases in some services, medical care, housing costs, which are not in the PPI.”

“We can’t anticipate a continuing decline in lettuce prices, unfortunately,” she added.

Today’s report again showed that there was little justification for worries of a resurgence in inflation, analysts agreed.

“The news is clearly that we have very stable inflation rates,” said David Wyss, chief financial economist for Data Resources Inc. “We think energy prices will come back a little bit in the next few months because they have dropped so far. But the base inflation rate is going to remain very stable.”