Wholesale Prices Off Scant 0.2% in March : Economy: Excluding volatile food and energy, other sectors post increases in month.
Falling gasoline and vegetable prices pushed wholesale prices down 0.2% in March, the first drop in seven months, the government said today.
The decline in the Labor Department’s Producer Price Index followed no change in February and a huge 1.8% gain in January.
A cold snap in December caused the January price spurt by killing Gulf Coast vegetable crops and producing a fuel oil shortage.
Energy prices began their recovery in February and were joined by food prices last month.
For the first quarter, overall prices advanced at an annual rate of 6.7%, well above the 4.8% rise for all of last year. However, analysts expect wholesale inflation for 1990 will be a little below last year’s rate. They anticipate continued declines for food and energy in the next few months.
The March report was better than expected. Most economists had predicted a slight increase of 0.1% or 0.2%.
Food prices dropped 0.6% in March, the sharpest decline since June. Vegetables, particularly tomatoes, celery and cabbage, declined 25.5%, the biggest drop on record going back to 1967. However, that marked only a partial recovery from gains of 23.3% in February and 58% in January.
Prices also fell for beef and veal, dairy products and coffee. They rose for eggs, rice, pasta, pork, chickens, turkeys, fish, soft drinks and cooking oils.
Energy prices overall dropped 2.4% in March after a fall of 5% in February and an increase of 13.6% in January.
Gasoline was down 2.8% and natural gas declined 2.5%. Fuel oil prices went up 10.6% but they had fallen 30.2% the month before.
Prices excluding the volatile food and energy sectors rose a moderate 0.3% in March after gains of 0.4% in February and 0.1% in January. Economists look to these so-called core prices as a better indication of underlying inflationary pressures.
Clothing prices for men and children fell, while the cost of women’s clothing rose. Passenger car prices, in the face of weak auto sales, declined 0.3% in March after no change in February and a 0.7% fall in January.
The various changes put the index for all finished goods, one stop short of retail, at 117.0 in March. That means a hypothetical selection of goods which cost $100 in 1982 cost $117 last month, up from $112.10 a year earlier.
Price pressures in earlier stages of the production process also eased in March. Intermediate goods showed no change while crude goods fell 1.4%. An example of the three processing stages would be bread for finished goods, flour for intermediate and wheat for crude.
The moderate inflation report should please the Federal Reserve Board which has been using relatively high interest rates to dampen demand and thus cool inflation.
But analysts cautioned against reading too much into recent months’ numbers, which have been sent on a roller-coaster ride by the effect of the weather on food and energy prices.
“The numbers in the next few months could give us a false sense of euphoria just as the number in January gave us a false sense of gloom,” said economist Robert G. Dederick of Northern Trust Co. in Chicago.
