Producer Prices Best in Two Years

A RECORD plunge in vegetable costs in June contributed to the best wholesale inflation performance in more than two years.

The Labor Department's Producer Price Index, which measures prices paid by wholesalers to producers such as farms and factories, fell a seasonally adjusted 0.3 percent last month, the steepest drop since March 1991.

The June report was expected to dispel any fears in financial markets that inflation was poised to accelerate. Economists said it should help keep long-term interest rates, including mortgage rates, at the lowest levels in more than two decades.

Price declines were widespread in June, but the most dramatic was a 37.9 percent plummet in vegetable prices, breaking the old record of 35.2 percent set in August 1965. Overall, food prices were down 0.9 percent. Energy costs fell 0.5 percent, including a 2.7 percent drop in wholesale gasoline prices.

Excluding the volatile food and energy categories, prices edged down 0.1 percent, the best showing in eight months. The inflation outlook is almost as mild on the consumer level. The Consumer Price Index rose just 0.1 percent in May and was expected to match the performance in June.

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