Wholesale Prices Fall O.6% in December : Economy: Sliding food and energy costs lead the way. Inflation still runs at 5.6% for the year.

A steep drop in food and energy costs pushed wholesale prices down 0.6% in December, the first retreat in eight months, the Labor Department said today in a report signaling that the recession is limiting price increases.

In November, the Producer Price Index rose 0.5%.

The December decline did little to ease the brisk inflationary pace for all of 1990, when prices rose 5.6%, due mainly to the sharp rise in oil after Iraq invaded Kuwait on Aug. 2.

The annual increase was the sharpest since a 7.1% rise in 1981 and compares with 1989’s 4.9% gain.

But excluding food and energy figures, which fluctuate widely from month to month, the so-called core rate of wholesale inflation rose 0.3%, the department said.

For all of 1990, the core inflationary rate, considered a more reliable gauge of price trends, rose a moderate 3.5%--a sign that price pressures are abating.

Wall Street economists had forecast a 0.1% drop in the PPI, which measures the change in prices producers receive for their goods, and a 0.2% increase for the core rate. The last time the index fell was in April, when it slipped 0.2%.

After rising for two months in a row, food costs slipped by 0.9% in December, due mainly to lower prices for fresh vegetables, dairy products, pork and coffee, the department said.

Energy prices fell by 4.8% last month after little change in November. Over the year, energy costs rose 29.8%, led by a jump in oil prices. Gasoline prices rose by 45.2% and heating oil by 28.1% in 1990, the department said.

Oil prices have started to climb again on fears that war in the Persian Gulf is inevitable after the collapse of U.S.-Iraqi talks Wednesday.

Higher energy costs would reignite inflation. But the current recession is easing inflationary pressures somewhat by slowing demand throughout the economy, economists said.

Slowing inflation should be a relief to the Federal Reserve, which ignored mounting evidence of economic slowdown and kept interest rates relatively high most of last year in an attempt to limit price gains.