WASHINGTON — Wholesale prices were unchanged in June, completing six months in which they dropped at an annual rate of 6.5%, the steepest deflation recorded for such a period in 37 years, the Labor Department said Friday.
The producer price index, driven by the worldwide collapse in oil prices last winter, had fallen steadily from January through April, but a 0.6% rise in May had led economists to predict that prices had bottomed and had begun to increase. However, Friday's report, which included still-lower energy prices and a promise of lower food prices, led economists to look for more wholesale price declines at least through the summer.
"It indicates that last month's uptick was a blip and nothing more," said Allen Sinai, chief economist at Shearson Lehman Bros. "The index continues to show essentially no inflation, with downward pressure on many prices. There are likely to be declines in the index during the next few months, and, for the year, it is likely to be down between 2% and 3%."
Even though gasoline prices increased 2.9% in June--after a sharp 8.6% spurt in May--sizable declines in fuel oil and natural gas drove the overall energy index down 0.6%, and more declines are expected this month.
Noting the failure of last month's meeting of the Organization of Petroleum Exporting Countries--the once-dominant petroleum cartel--to find a way to halt price declines, price specialist Donald Ratajczak of the Georgia State University economic forecasting project said that he was revising an earlier forecast of higher inflation.
$12-a-Barrel Oil Seen
"Deflation is reappearing," he said. "We thought oil prices would stabilize at $15 a barrel, assuming OPEC could stabilize production at 18 million barrels a day. It's now reported at 19.5 million and may be rising, so we're talking about $12 or $12.25 oil. That means a couple more months of negative prices at least, until we hit the heating season."
Food prices were unchanged after a 1.1% increase in May. And slight declines in intermediate and crude feed and foodstuff prices suggested that retail prices in the food category would be stable.
As has been customary during the steady month-by-month retreat of inflation, White House spokesman Larry Speakes praised the Administration's economic policies, which he said "have succeeded in keeping prices low, and that is good news for all Americans. The record of the Reagan recovery is unprecedented. Inflation is lower, interest rates are lower, and consumer spending . . . is higher."
But other economists cautioned that the boon to consumers of low inflation is somewhat offset by the fact that commodities producers' prices are falling. And they observed that the Federal Reserve Board's action Thursday cutting the discount rate to 6% in an effort to spur a stalled economy occurred not a moment too soon.
Slack in Economy
"The fact that producer prices are not increasing even after the exhaustion of the energy price decline indicates that there is considerable slack in the economy," Jerry Jasinowski, chief economist for the National Assn. of Manufacturers, warned.
Although energy prices were again slack in June, Jasinowski added, "a more significant development is that prices were level virtually across the board. The implication is that there is enough slack in the worldwide economy to prevent any immediate acceleration of inflation."
In Friday's report, the Labor Department's Bureau of Labor Statistics said: "In the first half of 1986, prices received by domestic producers of goods at all stages of processing declined at rates not experienced since 1949."
Energy Prices Down 28%
Key ingredients were retail prices, dropping at an annual rate of 6.5%; intermediate goods, falling at an annual rate of 8.3%; and crude goods, plunging 20.9%.