Producer Prices Post Biggest Drop Since 1986 Gasoline, Eggs, Cars, Computers Contribute To 1.2 Percent Drop

Prices paid by wholesalers fell in December for the ninth month this year, bringing the price drop for all of 1997 to 1.2 percent - the sharpest deflation since oil prices collapsed in 1986.

Only this time, in contrast to the 2.3 percent drop more than a decade ago, declines were much more broadbased. They ranged from gasoline to eggs to cars to computers, the Labor Department said Thursday.

In December, the department’s Producer Price Index - which measures prices paid to producers such as factories and food-processing plants - fell 0.2 percent, the same as in November. Food fell 0.1 percent, energy 0.2 percent and everything else, 0.1 percent.

For the year, energy costs fell 6.4 percent after shooting up 11.7 percent in 1996. Food prices fell 1 percent after advancing 3.4 percent the year before.

The so-called core rate of producer price inflation - finished goods excluding the volatile food and energy components - edged a negligible 0.1 percent higher for all of 1997 after rising 0.6 percent in 1996. It was the smallest rise on record since the department began tracking the core rate in 1973.

Economists expect the good inflation news to continue into 1998 as Asian nations with sharply devalued currencies flood the United States with cheap exports.