WASHINGTON — The federal government, in two largely positive reports on the economy, said today that wholesale prices last month posted their first drop since July, 1986, while retail sales, discounting the expected drop in new-car purchases, rose at their speediest clip since February.
Wholesale prices fell 0.2%, almost entirely a reflection of declines in food and energy costs, to nearly erase the 0.3% gain of September.
The Labor Department report provided dramatic evidence that inflation remains tame.
Retail sales overall were down 0.1%, but that was less of a drop than many analysts had expected.
Removing the decline in new-car purchases, which was forecast after the end of summer rebates, retail sales rose 0.3%. Indeed, nearly all of the overall sales weakness came from a 3.1% decline in auto sales after a 3.8% drop in the preceding month.
Little Immediate Effect
The Oct. 19 stock market crash, according to the sales figures, apparently had little immediate effect on consumer confidence. Today's report reflected sales activity throughout the month.
Today's reports, said Dirk Van Dongen, president of the National Assn. of Wholesalers-Distributors, were "good news. There's no other way to interpret it."
Economist Sandra Shaber of the Futures Group, a consulting firm, commented, "Every tea leaf that I can find shows that the impact of the stock market crash has been small on consumers, at least thus far."
More cautiously, Lawrence Chimerine, president of Wharton Econometric Forecasting Associates, said he feels that the new retail sales figures don't give much of an indication about consumer confidence.
"If there's going to be any reaction, it's going to take several months," he said.
Energy Prices Off 1%
The Producer Price Index for finished goods, which measures price activity one stop short of the retail level, showed energy prices falling. But the 1% decline was not as steep as the 3.7% drop in September.
Gasoline prices, which had tumbled 6.4% in September, fell 0.6%. Fuel oil prices were up 2.2% after a huge 11.4% drop. Natural gas prices fell 2.7%.
Food prices, up a sharp 1.1% in September, fell 0.1% in October, reflecting in large part a bountiful fall harvest. Nearly all food categories posted price decreases except fresh fruits, up 6.3%, and fish, up 11.5%. Egg prices fell 19.6%; beef and veal costs were off 1.4%; vegetable prices dropped 6.6%.
New automobile prices, up for the second month in a row, posted a 1.6% rise after a 3.6% increase in September.
For the first 10 months of 1987, wholesale prices advanced at an annual rate of 3%. Consumer prices, which also reflect the higher costs of services and imports, rose at an annual rate of 4.8% through September.
In another report today, the National Assn. of Realtors said sales of existing single-family homes dropped 3.3% during the July-September quarter as steadily rising mortgage rates dampened demand.