Wholesale prices ended 1990 with a surprisingly steep drop of 0.6 percent in December, but for the year as a whole prices rose at the fastest pace since 1981, the government said Friday.
The decline in the Labor Department's Wholesale Price Index was the sharpest for a single month in more than four years. Energy prices plummeted 4.8 percent, the biggest fall in 16 months.In advance of the report, most economists were expecting only a 0.1 percent or 0.2 percent drop in December.
For all of 1990, prices of finished goods one stop short of retail climbed 5.6 percent, up from 4.9 percent in 1989. That was the greatest gain since prices rose 7.1 percent nine years ago.
In 1991, most analysts expect much less wholesale price inflation. The sluggish economy should restrain both demand and prices, they say.
If war breaks out in the Persian Gulf, oil prices could soar again, as they did from August through October. But they will fall sharply as soon the shooting is over unless the war is protracted and destroys Saudi Arabian oil production facilities, analysts predict.
"If you talk about a brief war, one in which America emerges victorious, we think that oil prices can really plunge in the postwar aftermath," said economist Robert G. Dederick of Northern Trust Co. in Chicago.
In December, the energy price decline was led by a 10.7 percent drop in fuel oil prices, the biggest since February, and a 7 percent decline in gasoline prices, the most in 13 months. The price of natural gas, however, rose 6.7 percent.
For the year, energy prices were up 29.8 percent: 45.2 percent for gasoline, 28.1 percent for home heating oil and 3.7 percent for natural gas.
Food prices fell 0.9 percent in December after climbing 0.8 percent the month before and 0.9 percent in October. The drop was led by an 18.5 percent tumble in fresh and dried vegetable costs and a 15.7 percent fall in turkey prices.
For the year, food prices were up 2.5 percent. The sharpest advances were for fish, 15.9 percent; pork, 12.8 percent and beef and veal, 9.5 percent. Egg prices, however, dropped 12 percent, and turkeys and vegetables were both down 9 percent.
Excluding the volatile food and energy sectors, prices rose 0.3 percent in December, down from a 0.5 percent rise in November. For the year, this so-called core rate, considered a better indicator of underlying inflationary pressures in the economy, rose 3.5 percent, down from 4.2 percent in 1989.
Women's clothing prices fell in December, while men's and children's clothing costs were unchanged. There were price increases for passenger cars, cosmetics, floor coverings, lawn and garden equipment, tobacco and household appliances.
The various changes left the index for all finished goods at 121.9, up from 115.4 a year ago. That means a hypothetical selection of goods costing $100 in 1982 would have cost $121.90 last month, up $6.50 from the previous year.
Inflation at earlier stages in the production process also was down in December. Intermediate goods fell 0.9 percent and 5.4 percent.