Producer prices for finished goods rose a seasonally adjusted one-half percent last month as consumer food prices continued to fall and the recession held down the prices of many other goods, the Labor Department reported yesterday.
The finished goods index rose at a 6.3 percent annual rate in November, down from a 6.8 percent rate the previous month. Over the last 12 months, the index increased 7.1 percent, the smallest rise since the 12 months ended in March 1978. The index climbed 12.4 percent between November 1979 and November 1980.
At the White House, spokesman Larry Speakes said "the numbers suggest we are continuing to make moderate, steady progress in bringing inflation down."
During the last year, consumer food prices included in the index have dropped 0.4 percent. Energy prices in the index rose 0.9 percent in November, the largest jump since last April, as higher gasoline prices more than offset a continued decline in home heating oil prices.
Changes in finished goods prices often foreshadow movements in retail prices for consumers. The index also includes prices paid by companies for products bought for their own use directly from producers.
Capital equipment prices increased 0.8 percent in November, the same as the month before.
The index for intermediate materials increased only 0.3 percent. The foods and feeds portion of the index fell 1.9 percent and was down 17.1 percent over the last 12 months. Other portions of the intermediate index rose 0.4 percent.
At the crude-materials level, foodstuffs and feedstuffs dropped 2.1 percent, while nonfood materials fell 0.6 percent. Even with some recent declines, crude oil prices are still up 30.9 percent in the last 12 months and natural gas prices up 23.9 percent.
Robert Ortner, chief economist for the Commerce Department, said the drop in food prices "reflects both the ample production and softening demand." Meanwhile, the recession, which has produced a buyer's market in many other goods, is doing more than anything else to force sellers to lower prices.
"I think over a short period of time it's hard to see structural changes" in the economy that might have caused a drop in inflation. "I think the slowdown we've seen in the Producer Price Index is mainly a cyclical process," he said.
The Reagan administration is counting on a continuing slowdown in inflation to help achieve a rapid rate of economic expansion once the current recession hits bottom. Its latest forecast calls for a 7.7 percent increase in prices as measured by the GNP deflator in 1982 and only a 5 1/2 percent rate the year after.
While the prediction for next year is in line with expectations of a number of private forecasters, the sharp further drop for 1983 is not.
Meanwhile, wage pressures are easing. Over the last 12 months, the Labor Department's hourly earnings index has risen 8.3 percent, and in the last three months at a 6.8 percent annual rate.
Once the recession hits bottom, demand for a wide variety of industrial materials will begin to rise again, and so will their prices, which are very sensitive to market conditions. Similarly, analysts do not expect food prices to fall indefinitely.
When food prices and sensitive materials prices begin rising, continued progress on inflation will require additional declines in the rate of wage increase, economists maintain.