Prices at the wholesale level fell 0.6 percent in April, marking the fourth consecutive month of declines, as the drop in oil prices continued to be felt throughout the economy, the Labor Department reported yesterday.
It was the first time in 23 years that the wholesale price index had dropped four consecutive months. It also was the steepest four-month drop since the department began keeping records in 1947.
The Labor Department credited the continuing decline in oil prices with the drop in the monthly producer price index. Energy prices fell 8.4 percent in April, gasoline prices dropped 10.4 percent, heating-oil prices declined 8.7 percent and natural-gas prices were down 5.6 percent.
Gasoline prices fell less in April than in March, while natural gas and home heating oil prices fell further last month than they did in March.
Changes in prices at the producer level generally show up in consumer prices after a month or two, economists said. Economists expect consumer prices, which have declined for two consecutive months, to probably start rising by June or July as the slowdown in oil-price declines no longer offsets anticipated increases in prices for other consumer products.
So far this year, prices at the wholesale level have fallen so steeply that, if the decline in April continued every month this year, producer prices would fall 11.1 percent in 1986.
In other economic news, the Commerce Department reported that new-house construction rose a strong 4.1 percent last month to an annual rate of starts of 2.01 million units. Housing activity in the first quarter this year was the strongest in more than seven years.
Commerce Secretary Malcolm Baldrige said that increased consumer spending for housing should translate soon into higher spending for other goods.
"The recent step-up in housing activity to the fastest pace since the 1977-78 housing boom largely reflects the drop in mortgage rates," Baldrige said. Mortgage rates are below 10 percent in most areas, the lowest levels in eight years.
"Householders tend to spend more on home furnishings, appliances and other supplies after purchasing a house," Baldrige said. "This is one of the bellwether sectors for future overall economic growth."
Lower mortgage rates have lowered the average monthly payment by about $150 for a median-priced, conventionally financed new house, Baldrige said.
Excluding energy, prices generally rose moderately, the Labor Department said.
In the past year, prices at the producer level have declined 2.1 percent, consumer food prices have risen 0.1 percent and the cost of energy has plummeted 28.5 percent.
"It's quite possible we'll begin to see some increases in the producer price index in coming months, May or June," said David Jones, an economist for Aubrey G. Lanston. "The number reflected earlier declines in energy prices and food prices, and now we've seen a turn-up in both of those prices."
"The best news on inflation is behind us," Jones said.
The producer price index for finished consumer goods fell 0.9 percent in April, for the fourth consecutive monthly decline. The index for consumer foods rose 0.1 percent in April, after a 0.3 percent increase in March. Fresh-vegetable prices jumped 20.9 percent, after an 8.7 percent rise in March. Prices fell for beef, veal, fresh fruits, eggs, fish, shortening and cooking oils, and rose for poultry, pork, soft drinks and roasted coffee.
Costs of capital equipment rose 0.3 percent, the same as in March. The largest increases were for cars and trucks, pumps and commercial furniture.
The index for goods at the intermediate stage of processing dropped 1 percent, after a 1.2 percent decline in March. The index for products at the crude stage of production dropped 3.6 percent, after a 2.8 percent drop in March.
In a separate report, the Federal Reserve Board reported that U.S. factories, mines and utilities operated at 79.3 percent of capacity in April, unchanged from March. Economists attributed the low operating rate to the continuing influx of imports that has resulted in less production by domestic industries.
On the positive side, low capacity utilization means that inflation from a shortage of goods or bottlenecks in production is less likely, economists said.
The operating rate has fallen from 80.8 percent in January, due in large part to the problems of the oil and gas industries as a result of falling energy prices.
Mining, which includes oil and gas production, operated at 75.9 percent of capacity in April, compared with 76.8 percent in March.
Manufacturers operated at 79.4 percent in April, compared with 79.2 percent in March. Utilities' operating rate was 83.1 percent, compared with 83.3 percent in March.