Wholesale prices fell again in March, the Labor Department reported yesterday, matching February's 0.1 percent decline and indicating inflation is continuing to slow down.
The drop in producer prices means that increases in consumer prices will remain moderate in the months ahead, and the White House called it "good news for the economy and for American consumers."
But these inroads against inflation largely are a result of the present deep recession, which has pushed up unemployment and cut into company profits, many experts believe.
Yesterday's figures, which show declines in producer prices for intermediate goods and raw materials as well as finished goods, "suggest that profits in the first half of this year are going to be down tremendously," economist Joel Popkin said.
In a separate announcement yesterday, the admininstration also acknowledged officially that the federal budget deficit will top $100 billion both this year and in fiscal 1983, even if Congress accepts all the spending cuts and tax increases President Reagan has proposed.
The budget re-estimates show a deficit of $100.5 billion this year and $101.9 billion next year, compared to the figures of $98.6 billion and $91.5 billion that were published with Reagan's February budget.
The re-estimates do not reflect changes in the economic outlook since February. Administration officials have acknowledged that expectations for growth have decreased since then, and accounting for such changes would put the deficit several billion higher. Details on Page C7. )
The better-than-expected outlook for prices also pushes up the budget deficit by cutting the government's tax revenues, which rise more quickly when inflation worsens.
The White House was quick to hail yesterday's price figures, saying that "President Reagan was greatly encouraged" by the report. "After so many years of prices spiraling ever upward, it almost seems too good to be true," a spokesman said.
It is the first time since 1967 that all three of the producer-price measures (raw, intermediate and finished goods) have fallen for two consecutive months. "In the year before President Reagan took office, producer prices for finished goods rose by 11.8 percent," the White House said. "Over the past 12 months, that same index has risen by only 4.1 percent."
Last month's drop in producer prices is equivalent to a fall of 1.7 percent annually, the Labor Department said. It uses more precise figures to calculate this rate than the 0.1 percent monthly figure.
Sharply falling food and energy prices pulled down the overall producer price index, the Labor report said. Prices for energy products dropped by 2.3 percent in March, their third consecutive monthly decline and the sharpest drop in more than six years, the department said. Energy prices overall have fallen at an annual rate of 18.5 percent since December, "a drop approached only by a 14.2 percent rate of decline in the first quarter of 1976," the agency said.
Consumer foods prices at the wholesale level fell by 0.2 percent last month, after rising 0.5 percent in February and 1.1 percent in January.
The declines in prices for food and energy goods outweighed a 0.2 percent increase in prices for other consumer goods in March, the Labor report said. This rise was the same as in February.
A major reason for the slowdown in prices--and for the recession--has been the tight monetary policy pursued by the Federal Reserve Board, many analysts believe. The narrow measure of money rose by $900 million in the last week of March, the Fed reported yesterday, after a $3.2 billion drop the previous week.
After a money-supply bulge at the turn of the year, there has been virtually no growth in this measure of the money supply since mid-January, a Fed official said.
Many economists believe money policy should be eased and the budget deficit reduced to bring down interest rates and help the economy to recover.
"A tightening of the budget and easing of money policy is absolutely essential," economist Allen Sinai of Data Resources Inc. said yesterday. "In cracking one problem of inflation we've created another" of recession and high unemployment, he said