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 yesterday.
For all of 1990, the Labor Department's producer price index 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.
Excluding the volatile food and energy sectors, prices rose 3.5 percent in 1990, down from 4.2 percent in 1989.
"I don't think 1990 was as bad as it might appear at first glance," said Ron Schreibman, vice president of the National Association of Wholesaler-Distributors. "Our members, who are paying the prices measured in the index, tell us they are not seeing significant price pressures. The economy is too weak and won't support it."
The December decline was the sharpest for a single month in more than four years. Energy prices plummeted 4.8 percent, the biggest fall in 16 months.
Most economists had been expecting only a 0.1 percent or 0.2 percent drop in December. The last time the index declined more was in July 1986, when it fell 0.7 percent.
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 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.
The recent moderation of price increases should open the way for the Federal Reserve to fight the recession with lower interest rates, which stimulate buying. The central bank has cut short-term interest rates five times since late October, in quarter-point increments, with the latest cut occurring Tuesday.