Wholesale Prices See Record Decline

Wholesale prices took a record plunge last month and the nation’s manufacturing sector slumped, according to reports released Thursday that showed an economy facing an uphill climb to full health.

The producer price index, which measures prices paid at the factory, farm and refinery gate, plummeted 1.9% in April, the biggest drop on record since 1947, the Labor Department said.

Much of the decline was due to an 8.6% fall in energy prices. Those prices, in turn, reflect a big drop in oil prices from late-February highs as fears about a war-related supply disruption eased.

However, prices for cigarettes, cars, sport utility vehicles and other light trucks also fell, dragging the so-called core PPI, which excludes volatile food and energy prices, down a sharp 0.9% -- its biggest plunge since August 1993.

In a separate report, the Federal Reserve said output at manufacturing plants, mines and utilities slid 0.5% last month, its second consecutive drop. U.S. industry operated at only 74.4% of capacity, the lowest level in 20 years.

Although wholesale prices fell more than economists had expected, analysts cautioned against concluding that deflation, a persistent drop in consumer prices, was about to set in.

The Labor Department will report April consumer prices today.

In a separate report by the Labor Department, first-time jobless filings fell by 13,000 last week to a seasonally adjusted 417,000, their third consecutive weekly drop.

It was the 13th week in a row that claims remained above 400,000, a level economists say indicates a stagnant labor market.

In another sign of weakness, the number of jobless workers who remained on the benefit rolls in the week of May 3, the latest week for which data are available, rose a sharp 120,000 to 3.77 million. That marked its highest level since mid-November 2001, when the U.S. economy was reeling from the Sept. 11 attacks.

With the economy sluggish, producers have had a tough time trying to raise prices.

Car prices at the producer level fell 2.6% last month, their biggest drop since October 2001, while prices for light trucks fell 4.6%, the largest drop since February 1982. Vehicle prices have fluctuated sharply in recent months, reflecting on-again, off-again sales incentives.

Record declines for the cost of gasoline and home heating oil partly accounted for the sharp drop in energy costs. Gasoline prices fell 22.3%; heating oil was down 29.3%.