Washington area consumer prices dropped for the first time in 17 years during April and May because of a depressed housing market and a huge drop in retail sales.

Prices of clothing, housing, gasoline and heating fuel all went down, more than offsetting increases in the cost of cars, food, shoes and electricity, the Labor Department reported yesterday.

The area Consumer Price Index dropped 0.1 percent for the two months compared with a 1.4 percent rise nationally. The decline followed a 0.3 percent rise during February and March and a 0.9 percent increase in December and January.

Washington economists said they couldn't predict whether the drop will continue or turn out to be an aberration much like the last decline of 0.1 percent in the three months ended in February 1965.

"It might decline to a certain point and stay," said Noor Ahmed, an economist for the Metropolitan Council of Governments. If the national economy picks up, "It could increase," Ahmed added.

"It's hard to say if it's a downward trend," said Jesse Thomas, a Labor Department economist. Thomas said that, although overall price increases declined, most product costs increased. But he said most of the increases were offset by larger drops in a few major areas.

Much of the decline in the cost of living came from poor retail sales, which caused stores to cut prices in hopes of attracting more business. "Sales are really depressed in the District. Suburban stores are doing somewhat better, but not by much," said Leonard Kolodny of the Greater Washington Board of Trade's Retail Bureau.

"We're no longer recession-resistant," added Kolodny. He said the plunge in sales is the sharpest since the Board of Trade started collecting statistics in 1965. "What we are seeing is, people are afraid, they're insecure" about their jobs, "so they're tightening up on their spending."

The Labor Department figures showed apparel prices dropped 2.4 percent, reflecting declines of 1.9 percent in men's and boy's clothing and 5.4 percent in women's and girls' wear and jewelry. Footwear prices rose 2.7 percent.

The housing cost picture was mixed. Rents increased 2.8 percent, in part because the high cost of buying a house is forcing more people to rent, pushing up the price of rental housing.

The costs of purchasing a home--including interest, taxes and insurance--dropped 1.8 percent, continuing a trend that began in December. Prices of fuel oil, coal and bottled gas for homes dropped 3.7 percent, while those for natural gas and electricity rose 2.3 percent.

Part of the decline in homeowning costs is the result of increased sales of lower-priced, smaller homes. Mortgage rates dropped to an average of 17.15 percent from 17.36 percent in March. The Labor Department figures are only for conventional mortgages and do not include so-called "creative financing" plans used to make homes easier to sell.

Transportation costs dropped 0.1 percent, led by a 0.4 percent decline in private transportation costs. The price of public transportation rose 3.2 percent. Price increases for new and used cars, airline travel and tires were offset by declining gasoline prices. However, local economists say that gasoline prices have begun to rise recently after falling for more than a year.

Grocery store food prices rose 1.2 percent, largely because of 3 1/2 percent higher costs for fish, beef, pork, poultry and eggs. Fruit and vegetable prices dropped 0.3 percent, and dairy product prices declined 0.1 percent. The price of a restaurant meal rose 0.1 percent, and the cost of alcoholic beverages increased 0.2 percent.

Medical care costs were up 1.0 percent, and the price of entertainment increased 0.5 percent. Other increases were reported for toiletries, personal care appliances and cigarettes.