Prices Show No Change for March : Economy: Wholesale energy and food costs fall. The news is welcomed as evidence of a ‘soft landing.’

The cost of energy and food fell at the wholesale level in March, giving the country its best news on prices in five months and suggesting that the economy is still on the Federal Reserve Board’s glide path for a “soft landing.”

The Labor Department reported that its producer price index, which posted worrisome gains of 0.3% in January and February, showed no increase at all in March, as the prices of gasoline, autos and women’s clothing dropped. A “soft landing” would be growth slow enough to head off inflation but not so slow as to throw the country into a recession.

Financial markets initially rallied on the news, and economists were pleased to see that so far, the steep slide in the dollar has not led to higher prices. But the market gains melted away later in the day as stocks followed bond prices lower after remarks by Fed member Janet Yellen called into question the market’s view that the central bank is through raising interest rates.

Even with the jitters in the markets, many economists said the price report bolsters their convictions that the Fed is done raising interest rates for now. The March figures for inflation at the retail level will be released today.

Some analysts said the better-than-expected wholesale figures were prompting them to revise downward their forecast for a rise in the consumer price index.

Bruce Steinberg, an analyst at Merrill Lynch in New York, said he is looking for consumer prices this year to rise 3.25%, a slight increase from the 2.7% gain registered in 1994 and ’93.

The zero rate of increase for March is the best showing since wholesale prices at the finished-goods level declined 0.4% in October.

The core rate of wholesale inflation, which excludes the volatile food and energy sectors, posted a well-behaved 0.1% for March after having risen 0.3% in February.

Even more significant to some analysts was that price pressures eased significantly at the crude and intermediate levels of production. Steep increases at those levels in previous months had caused worries about increasing inflation pressures. Crude prices fell 1.3% in March, and intermediate prices rose just 0.3%.

For the year so far, prices for finished goods have been rising at an annual rate of 2.6%, compared to an increase of 1.7% last year.

Energy prices fell 0.5% in March, reflecting a 2.1% drop in gasoline prices. It was the second straight monthly decline in natural gas prices. The decrease was attributed to a mild winter, which kept heating fuel supplies plentiful.

Food prices fell 0.2% in March as prices for pork, beef, coffee and fruit dropped. Vegetable prices, however, climbed 5.7% as squash prices doubled. Broccoli, lettuce and cauliflower also saw steep gains because of the winter floods in California.

Separately, Fed Chairman Alan Greenspan said in Stockholm on Tuesday that central bankers must further promote the reduction of inflation worldwide, building on the “dramatic slowdown in the rate of price inflation” of the past decade.

Greenspan made his remarks before the Centre for Business and Policies Studies and the Sveriges Riksbank, Sweden’s central bank. He said the Fed and other central banks must bolster their reputations as inflation fighters and that they must “maintain a credible long-run commitment to price stability.”

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Producer Price Index

For finished goods; seasonally adjusted index, 1882 = 100:

March, 1995: 127.3

* Source: Bureau of Labor Statistics