Wholesale Price Index Unchanged in May : Economy: New vegetable crops contribute to biggest drop in food prices in a year. Analysts say inflation pressures are in check.

Tumbling food, energy and raw material costs left wholesale prices unchanged in May, the government said Friday, as the economic slowdown engineered by the Federal Reserve Board helped cool inflation.

Vegetable prices plunged, contributing to the largest drop in food prices in a year. Prices of raw materials and other goods used in the early and intermediates stages of production--such as lumber and paperboard--either fell or remained well in check after months of worrisome increases.

The news surprised analysts, who were expecting a 0.3% rise in the producer price index.

“Right now, inflation pressures show signs of going into hiding,” said Robert Dederick of Northern Trust Corp. “The Fed can take credit. This is what they would like to see.”

The unexpected flat reading for the producer price index last month follows a 0.5% jump in April, the Labor Department said. Prices were steady in March.

After factoring out often erratic food and energy costs, the “core” PPI was up a moderate 0.3% in May, the same as in April.

The PPI measures inflationary pressures before they reach the consumer. The consumer price index figures for May will be released Tuesday. Some analysts are predicting a 0.3% increase, down from 0.4% in April.

The latest report shows “little pickup in inflation pressures,” said economist Bruce Steinberg of Merrill Lynch & Co. in New York. “Given the sharp slowdown in [economic] activity now taking place, inflation pressures should remain muted.”

But the report brought little cheer to Wall Street. The Dow Jones industrial average tumbled 34.58 points to 4,423.99, and the 30-year Treasury bond yields soared 0.11 percentage points to 6.72%.

Vegetable prices tumbled 14.1% in May, led by a drop of more than 60% in onion and tomato prices. Vegetable prices had jumped in April because of flooding in California, but new supplies from Florida and Washington were rushed in to fill the void.

Not all prices were well contained last month.

Prices of melons and other fresh fruits shot up a record 29.8%, reflecting seasonal demand for summer produce. Tobacco prices took their largest jump in nearly 1 1/2 years, climbing 2.2%. Gasoline and heating oil prices also rose.

The May producer price index shows that prices of “crude” goods used early in production--such as scrap metals and leaf tobacco--fell 0.8% last month after rising 2.1% in April.

Over the past year, wholesale prices have risen 2.2%, the quickest annual pace since the 2.5% rise in the 12 months ended in April, 1993. Despite the acceleration, economists expect the recent slowdown in the economy to tame inflation pressures.

After recent data showing weakness in the economy, some economists have called on the Fed to cut interest rates soon to revive growth. The latest price report gives the Fed room to do so, some argue.

But other economists say they doubt a rate cut will occur before later this summer.

Fed Chairman Alan Greenspan said Wednesday that the economic slowdown has become “quite pronounced” but that despite a sluggish outlook, he does not expect a recession soon.