Producer Price Is Down Again

Prices paid by wholesalers dropped in November for the eighth time this year - good news for buyers of products from cars to computers but bad for manufacturers facing a possible profit squeeze.

The favorable inflation data touched off a bond market rally that drove long-term interest rates to a four-year low. Mortgage rates were expected to drift lower as a result.

The cost of finished products from U.S. factories, refineries and food processing plants declined 0.2 percent, the Labor Department said Friday.

The unexpected decrease followed three monthly increases. But, with a record seven consecutive declines from January through July, the Producer Price Index has fallen at a 1.2 percent annual rate through November. That compares with a 2.8 percent increase for all of 1996.

Producer price inflation isn’t likely to break out any time soon, analysts said. U.S. manufacturers will come under intensifying competition from Asian manufacturers who can sell cheaply because their currencies have been devalued sharply. And the price declines for both imported and U.S.-made goods will help restrain consumer inflation early next year by partly offsetting rising service costs.