Wholesale Prices Off Tiny 0.1% in January : Economy: A big drop in energy costs provide a bright spot during the war and the recession.

Prices at the wholesale level edged down a tiny 0.1% in January as a big drop in energy costs helped provide a bright spot for an economy beset by war and recession.

The Labor Department reported that the decline in its producer price index last month occurred in spite of a record jump in the cost of alcoholic beverages as producers used higher federal taxes as an excuse for boosting their prices.

Increases in the producer price index normally show up with only a short lag in the consumer price index, which measures price changes at the retail level.

The January decline in wholesale prices followed an even bigger 0.6% drop in December. Both months were heavily influenced by falling gasoline prices. Oil costs, which had jumped sharply after Iraq’s Aug. 2 invasion, have been coming down in recent months.

The 0.1% drop in wholesale prices translated into an annual rate of decline of 1%, the Labor Department said. That is far below the 5.6% increase in wholesale prices that occurred in 1990, the biggest jump in nine years.

In another economic report today, the Federal Reserve said industrial production slipped 0.4% in January for its fourth straight monthly decline, making the longest string of losses since the last recession nine years ago. The January decline followed drops of 1.1% in December, 1.6% in November and 0.6% in October. The manufacturing sector has not seen a longer stretch of losses since the 10-month period between March and December of 1982.

The January decline in wholesale prices was led by a 10% drop in gasoline costs, which followed an 8.6% drop in December. The Labor Department price survey was taken before the Jan. 17 start of allied bombing of Iraq. Since that time, oil traders have pushed world energy prices down even further, reflecting an opinion that Saddam Hussein no longer has the capability to damage oil fields in Saudi Arabia.

Because of the price drops since the outbreak of war, analysts said energy prices should fall even further in February.

The overall energy index was down 2.5% after a drop of 4.7% in December. Also holding down prices was a surprising 0.3% drop in food costs.

Many economists had been expecting food prices to rise in January because of a freeze that harmed fruit and vegetable crops in California.

While fruit prices did jump 12.7%, vegetable prices actually fell 17.6% as ample supplies in Florida offset the effects of the California freeze.

Wholesale prices, discounting changes in food and energy, were up 0.5% in January, compared to a 0.2% December increase.