Prices at the wholesale level so far this year have fallen at the fastest rate on record, the Labor Department reported yesterday.
Pushed by a record 21.9 percent plunge in wholesale gasoline prices last month, the producer price index dropped 1.1 percent during March.
For the first three months of this year, the index has fallen at an annual rate of 12.4 percent, the largest decline since the index was first calculated in 1947, the Labor Department said.
Economists said all of the decline in worldwide oil prices has not yet appeared in the statistics and sharp drops are expected to continue for several months. These steep declines may be offset, however, by slowly rising prices for food and imported products, economists said.
Last month, food prices rose 0.3 percent -- the first increase this year, following a 1.6 percent decline in February. From March 1985 to last month, prices for finished energy goods fell 20.5 percent and consumer food prices declined 0.5 percent.
The deflation of producer prices is expected to flow through to prices at the consumer level in a month or two, leading to declines in prices at the retail level at least through April, said Sara Johnson, an economist for Data Resources Inc.
"Oil prices cannot continue to drop as steeply, and we're seeing some firming in oil markets right now," economist Johnson said. "So, once oil prices stabilize, the effect of the dollar's depreciation and import prices will lead to a very moderate rate of inflation."
After April, producer prices may begin to rise slowly, increasing at an annual rate of about 3 percent by the second half of the year, she said. Johnson said her firm expects a 2 percent increase in consumer prices for the year, which would be the lowest rate in 30 years.
The decline in the dollar generally makes imports more expensive and domestic goods relatively cheaper. However, many economists have said that rather than raise prices, some importers will, for a while, try to keep prices down to maintain their market share.
White House spokesman Larry Speakes said the sharp rate of deflation means "the economy continues to grow, creating new jobs and expanded opportunities."
Lawrence Chimerine, an economist for Chase Econometrics, said that gasoline prices probably will drop "a few more cents at the pump." In the last few months, pump prices have declined about 20 cents on average, Chimerine said.
Other energy prices have also declined. Home-heating oil prices fell 6 percent in March, compared with the record 26.2 percent drop in February. Natural-gas prices fell 0.6 percent, compared with a 0.1 percent increase the month before.
The index for consumer foods rose 0.3 percent after falling during the previous two months. Prices rose for fresh fruits and vegetables, pork, processed poultry and eggs, the Labor Department said. Price declines slowed for beef and veal.
The index for consumer goods other than foods and energy increased 0.8 percent, following a 0.1 percent drop in February. These increases were due to higher costs for light trucks, household furniture, drugs, alcoholic beverages, house furnishings and floor coverings, Labor said.
Capital equipment costs rose 0.3 percent after rising 0.1 percent in February. The increase in crude goods -- materials at the lowest level of the production chain -- dropped 2.8 percent, following a 5 percent fall in February. Intermediate-goods prices fell 1.2 percent, following a 1.4 percent fall in February.
The producer price index was 288.1, meaning that goods that cost $10 in 1967 cost $28.81 last month.
In a separate report, the Commerce Department said retail sales dropped 0.8 percent in March, largely because of a decline in the dollar value of automobile and gasoline sales. Measured in gallons, gasoline sales were up, but with prices dropping, the value of the sales declined.