Producer Price Indexes, 1991

prices for live turkeys turned up and price de-
creases slowed for processed turkeys in 1991;
effective marketing for a variety of turkey prod-
ucts led to stronger demand.

Prices for eggs declined nearly 5 percent in
1991, less than half as much as in the preceding
year. Although egg production was slightly higher
in 1991, the rate of expansion slowed, as produc-
ers became more cautious because of lower (but
still positive) net returns.

Fruits and vegetables. From December 1990 to
December 1991 the index for fresh fruits de-
creased 18.3 percent after rising 11.0 percent in
the preceding year. Substantial declines for grapes,
peaches, and pears at the end of the year ac-
counted for much of the downturn. The navel
orange index, however, climbed 17.7 percent,
reflecting the California freeze in December 1990.

The fall in the price index for fresh and dried
vegetables accelerated to 16.3 percent after fall-
ing 9.0 percent in 1990 and 5.7 percent in 1989.
This was the largest decline in 7 years. A 28.9-
percent drop in white potatoes accounted for
much of the decrease. An excellent crop of Irish
potatoes in all four seasons kept potato prices
below the previous year’s levels. In addition, the
index for tomatoes ended up 40 percent lower
than in December 1990. The combination of an
excellent Florida crop and stiff competition from
imports from Mexico drove down tomato prices.

Other vegetables, however, registered price
increases during the year. Heavy rains in March
and an abnormally cold spring delayed harvests
and required replanting of some California vege-
tables, In the fall, the whitefly infested the desert
areas of California, damaging lettuce, cauli-
flower, and broccoli crops. Cooler temperatures
in December mitigated the infestation, but not
before it had damaged more than $200 million
worth of produce. Prices for lettuce surged more
than 120 percent in November, but then fell more
than SO percent in December; over the year, this
index netted a decline of 10.3 percent.

Hay andoilseeds. The Producer Price Index for
hay slumped 32.2 percent over the year, nearly
twice as much as in 1990. Excellent range and
pasture conditions, as well as a reduction in the
use of hay for feeding, pushed hay prices down
substantially.

The oilseeds index fell 10.6 percent over the
year. Prices for peanuts retreated 31.6 percent, as
an excellent 1991 crop followed the 1990 crop
failure. The cottonseeds index also ended the year
one-third below the level of December 1990, as
record world production in 1991 depressed do-
mestic markets. Soybean prices turned down 7.4
percent after a moderate increase in the year

10 Monthly Labor Review May 1992

before, as 1991 soybean production levels were
even higher than those of the previous year. The
decrease in oilseed prices was reflected in the
indexes for crude vegetable oils and for shorten-
ing and cooking oils, both of which turned down
after rising in 1990.

Sugar and soft drinks. Prices for both raw cane
sugar and refined sugar turned down in 1991 after
a slight increase in the previous year. A good
Louisiana cane crop after a poor one in the
previous year drove prices downwards. In addi-
tion, strong world production depressed sugar
prices, as low growth in usage rates in developing
countries resulted in static trade.

Soft drink prices edged up 0.1 percent, much
less than the advance in the previous 12 months.
The index for chocolate products, however, rose
substantially more than in the year before.

Milk and dairy products. The uptum in prices
for milk and dairy products offset some of the
deceleration in the crude and the finished foods
indexes. The fluid milk index surged 17.1 percent
after dropping more than 25 percent in 1990.
Milk production fell below 1990 levels, as low
returns for milk and higher prices for slaughtered
cows induced many producers to exit the indus-

Following decreases in 1990, prices tured
up for condensed and evaporated milk, cheese,
and fluid milk products. Overall, the index for
dairy products rose 6.5 percent in 1991 after a
7.1-percent decline in the preceding 12 months.
Although butter prices fell 1.6 percent over the
year, this was substantially less than in the year
before.

Grains, bakery products, and animal feeds. From
December 1990 to December 1991, the grains
index increased 12.3 percent, following a sub-
stantial decrease in the previous 12 months. The
upturn was primarily caused by a 37.1-percent
rise in wheat prices after a 34.4-percent drop in
1990; this was the largest annual increase since
1973. Domestic wheat production increased about
40 percent from 1989 to 1990, driving prices
sharply lower. In 1991, far fewer acres were
devoted to wheat, and production retreated back
to around 1989 levels. High levels of exports,
attributable to lower world wheat production in
1991, also helped to raise wheat prices.

Flour prices rose 18.4 percent in 1991 after
falling by about the same amount in the previous
year. (Prices for flour are highly dependent on
those of wheat, but fluctuations are typically
reduced about 50 percent.) The bakery products
index rose slightly more than in the preceding 12
months. Despite higher flour prices, production


Construction materials. The increase in the in-
dex for materials and components for construc-
tion slowed to 0.8 percent in 1991, after rising 1.5
percent in the preceding year and 2.5 percent in
1989. Prices for fabricated structural metal prod-
ucts, plastic construction products, and asphalt
felts and coatings turned downward after advanc-
ing in 1990. Prices for nonferrous wire and cable
and for steel wire fell faster in 1991 than in the
preceding year. Price advances slowed for heat-
ing equipment, air conditioning and refrigeration
equipment, concrete products, wiring devices,
switchgear equipment, plumbing fixtures and brass
fittings, and fabricated ferrous wire products.
Gypsum products continued to decline steadily,
as in most recent years. In contrast, prices for
lumber and wood products were much stronger in
1991 than they had been a year earlier.

The decline in mortgage interest rates in 199]
was a boon for those homeowners who were able
to reduce their monthly mortgage payments sub-
stantially by refinancing. However, these lower
rates boosted new residential construction only
modestly by the end of the year. For 1991 as a
whole, the number of new housing starts barely
exceeded 1 million units—about 15 percent be-
low the 1990 level and the smallest number of
new starts for any calendar year since the imme-
diate post-World War II period. After starting the
year with an annual rate of only about 850,000
units, the rate of new housing starts had recovered
to about 1.1 million units by year’s end. The
number of new housing starts peaked at about 1.8
million units in 1986 and has declined in each
year since.

Within the residential housing sector, con-
struction activity was weaker for apartment
houses than for single-family homes. Outside of
the residential sector, the market for construc-
tion of new office buildings and other commer-
cial projects remained depressed in those sections
of the country still trying to absorb the excess
inventory from the boom of the 1980’s. Private
nonresidential construction spending was nearly
20 percent lower in December 1991 than it had
been a year earlier. Public construction spend-
ing was marginally higher at the end of 1991
than at the end of 1990. Overall construction
spending was down 10 percent in 1991 from
1990’s level.

While price movements for most kinds of
construction materials reflected the sluggishness
of the economy, prices for many kinds of wood
products rebounded in 1991. Softwood lumber
Prices fell early in the year, in part because of the
uncertainty associated with events in the Persian
Gulf. The surge in consumer confidence in the
aftermath of Desert Storm raised lumber prices
considerably in the second quarter. At the same

time, further upward pressure resulted from log-
ging restrictions in the Pacific Northwest in con-
nection with the controversy over preserving the
habitat of the endangered spotted owl. Adverse
weather in some logging areas also served to raise
lumber prices. Softwood lumber prices then re-
treated in the third quarter as eased logging re-
strictions and improved weather boosted supplies.
The failure of the economy to follow a normal
recovery path led to less optimistic prospects for
the housing market and thus lowered demand for
wood products; lumber is a far more essential
material in residential construction than in other
types of construction activity. Lumber produc-
tion cutbacks then led to a price uptum in the final
months of 1991.

The net result was a 12-percent jump in the
softwood lumber index, following a drop of 5.1
percent the year before. Similarly, plywood prices
advanced 9.3 percent in 1991, nearly offsetting
the impact of its decrease in 1990. Improved
export markets were an important factor behind
the upturn in plywood prices. Millwork prices
rose much more than in the preceding year.

Basic industrial materials

The index for crude nonfood materials less en-
ergy fell 8.0 percent in 1991, after edging up 0.6
percentin the previous year. This index registered
moderate declines in most months of the year, as
the economy failed to regain significant strength.

In 1991, prices turned down substantially for
iron and steel scrap, raw cotton, copper base
scrap, and uranium, radium, and vanadium ores
following increases the year before. Prices fell
faster for aluminum base scrap, copper ores,
cattle hides, wastepaper, and silver ores. By con-
trast, the index for softwood logs turned up,
following a moderate decrease in the previous
year. In addition, prices for sand and gravel,
pulpwood logs, and iron ores rose faster than in
the preceding year, and price declines slowed
for gold ores.

Metal scrap and ores. Metal prices led the
downtum in the basic industrial materials index.
The index for iron and steel scrap dropped 13.7
percent, following a moderate increase in 1990.
Both domestic and export markets were relatively
poor for this industry.

An abundance of scrap materials from Eastern
Europe, combined with higher shipping rates,
drove metal scrap export levels substantially
below those of 1990. In addition, lower demand
by the automotive industry further depressed fer-
rous scrap prices. The avoidance of a strike led to
sharp price declines in June. The ferrous scrap
index increased moderately in late summer with

Monthly Labor Review May 1992

15



Producer Price Indexes, 1991

Table 4. Annual percent changes for selected finished goods other than foods and
energy in the Producer Price Index, 1987-91
Index 1987 1988 1989 1980 1991
Finished goods other than foods

and energy... .....eeceeees 24 43 42 35 34
Consumer goods ...°. 27 48 44 37 34
Passenger cars -35 38 24 43 35
Tobacco products ... 125 13.4 135 126 13.4
Alcoholic beverages . 4 15 23 2.0 55
Prescription drugs . .. 93 8.0 95 a4 7
Over-the-counter drugs 48 65 44 42 59
Publications .................. 38 59 48 49 32
Capital equipment ............... 13 36 38 34 25
Light trucks a 6.4 27 4 5.7
Heavy trucks . .- . -29 57 15 36 37
Civilian aircraft .. 9 32 54 5.0 6.1
Metal forming machi 24 61 49 47 29
Construction machinery 2.0 32 48 38 28
Computers = = = ~19.5

Nore: Data are calculated on a December-to-December basis. Dash indicates data not available,

Machinery. Prices for a broad array of ma-
chinery moved up in 1991, but substantially
slower than they had a year before. Machine
tools showed a particularly large deceleration;
the index for metal forming machine tools, which
had soared nearly 10 percent in 1990, slowed to
a rise of 2.4 percent, while prices for metal cut-
ting machine tools moved up 2.9 percent in 1991
after climbing 4.7 percent a year earlier, The
1991 increases for both machine tool categories
were the smallest since 1987. The index for
oilfield and gasfield machinery increased 3.1
percent over the year, about half the size of its
1990 advance, and mining machinery prices also
rose more slowly. However, indexes for office
machinery and for x-ray and electromedical
equipment both turned up modestly after small
declines in 1990.

Weak demand for machinery from firms which
were reluctant to expand until a general recovery
was clearly underway accounted for much of the
deceleration in price advances for machinery.
The absence of significant material or labor cost
pressure also helped to hold down inflation in this
sector. The price slowdown was especially pro-
nounced among machine tools, partly because
retrenchment by automotive firms forced a post-
ponement of their retooling plans. Defense cut-
backs also hurt machine toolmakers. Furthermore,
hopes that American-made machine tools had
regained a technological edge over foreign com-
petition in markets abroad proved premature.
Exports of American machine tools were unusu-
ally strong for several years before stabilizing in
1991, The reversal in fortune among energy pro-
ducers in 1991 effectively braked the 1990 runup
in prices of oilfield and mining machinery, while

12 Monthly Labor Review May 1992

the continued sluggishness in most construction
markets restrained prices for construction ma-
chinery.

Computers. The index for electronic comput-
ers, which was introduced into the pri system in
January 1991, ended its first year with a decrease
of 19.5 percent. This reflected a long-established
trend towards improved technical capabilities
combined with lower costs. Like many other
industries, the computer industry reacted to lower
demand from business, consumers, and the De-
fense Department through intense price competi-
tion. Plans were implemented to reduce capacity
so that firms could become profitable even in the
face of falling demand and prices. On a favorable
note, exports rebounded after the conclusion of
Desert Storm, as producers supplied computer
parts to the growing number of their offshore
plants. Imports, especially of portable computers,
also turned up in 1991.

Tobacco products, alcohol, and drugs. The
Producer Price Index for tobacco products
climbed 13.1 percent in 1991; this index has
registered increases of about 13 percent in each
of the last 5 years. At the end of 1991, the index
for tobacco products was more than 267, while
the index for finished goods overall was still
less than 125 (both series are on the 1982=100
base.) In other words, while prices for finished
goods in general were less than 25 percent above
their 1982 levels, prices for tobacco products
were more than double what they were in 1982.

Continuing a trend that developed in the mid-
1980's, heavier export demand for cigarettes in
1991 again largely compensated for the drop in



levels were up, as consumers were urged to in-
crease their intake of carbohydrates for health
reasons.

Corn prices remained relatively stable over the
year, recording a net rise of 2.2 percent after a
small decline a year earlier. The 1991 corn crop
turned out even larger than the bumper 1990 crop,
moderating prices despite increased feed use.

Producer prices for prepared animal feeds rose
2.7 percent after falling 4.0 percent in the previ-
ous year. An increased demand for feeds was
prompted by a record high production of cattle
and poultry. Much of the acceleration in the
intermediate foods and feeds index was attribut-
able to this upturn in prices for prepared animal
feeds.

Other finished goods

Prices received by domestic producers for fin-
ished goods other than foods and energy moved
up 3.1 percent in 1991, following an advance of
3.5 percent a year earlier and a 4.2-percent rise in
1989 (table 4). While it may be tempting to
assume that a recession year like 1991 would
witness a slower pace than may be expected in the
years ahead, a look at this index since the previous
recession suggests otherwise. The following
tabulation shows the “core” rate of inflation in the
Ppi (finished goods other than foods and energy)
over the 1981-91 period:

Year PPL Year PPL

core rate core rate
1981... VT 1987... 21
1982 49 1988 . 43
1983 19 1989. 42
1984 2.0 1990 . 3.5
1985 27 1991... 3.1
1986... 2.7

The core rate of inflation in 1982, the last
recession-dominated year before 1991, was 4.9
percent. This rate slowed dramatically to the 2-
percent level in each of the first 2 years of the
ensuing recovery and remained below 3 percent
in each of the 3 years thereafter. The fact that the
core rate receded and remained low long after the
last expansion began indicates that further decel-
eration from the 1991 rate may be able to coexist
with a broad economic expansion. Evidence for
this hypothesis can be found in the fact that core
inflation slowed from a 3.6-percent annual rate in
the first half of 1991 to a rate of 2.6 percent in the
second half.

Capital equipment prices slowed from a 3.4-
percent increase in 1990 to arise of 2.5 percent in
1991. Increases were at least 2 percentage points

lower than those of the previous year for several
categories—metal forming machine tools,
transformers, oilfield and gasfield machinery,
commercial furniture, railroad equipment, and
photographic equipment. In addition, the new
index for electronic computers dropped almost 20
percent in 1991. In contrast, indexes for light
trucks, civilian aircraft, and ships rose more in
1991 than in either 1990 or 1989.

The increase in the index for consumer durable
goods decelerated to 2.2 percent after advancing
2.7 percent in 1990. This was principally attribut-
able to a moderation in the passenger car index.
Prices for mobile homes, furniture, floor cover-
ings, and gold jewelry also moved up less than in
the preceding year. In contrast, glassware and
flatware prices tumed up after each had fallen
about 8 percent in 1990.

The index for consumer nondurables other
than foods and energy rose 4.2 percent, almost
as much as the year before. Price indexes for
newspaper and periodical circulation, books,
children’s apparel, and prescription drugs moved
up less than in 1990, and the index for sanitary
paper products turned down after a moderate
increase in 1990. In contrast, prices for alcoholic
beverages, over-the-counter drugs, and women’s
apparel climbed much more in 1991 than in
1990. In addition, the index for tobacco products
surged at a double-digit pace for the fifth con-
secutive year.

Transportation equipment. The Producer Price
Index for passenger cars rose 3.5 percentin 1991,
well below 1990's increase of 4.3 percent. How-
ever, truck prices failed to follow suit; prices for
light trucks accelerated substantially, from 0.4
percent in 1990 to 5.7 percent a year later, and
prices for heavy trucks moved up 3.7 percent in
1991, about the same as in the preceding year.
Indexes for civilian aircraft and ships each rose
more than 6 percent in 1991, somewhat more than
their 1990 advances. The railroad equipment in-
dex, which had risen around 5 percent annually
for3 consecutive years, edged up only 0.7 percent
in 1991. ‘
For domestic producers of motor vehicles,
1991 was another poor sales year, relieved only
by a brief surge of demand in the afterglow of
Desert Storm. Import sales were also generally
weak, although they continued to command a
sizable market share. Sales of passenger cars
and light trucks were down about 12 percent
from 1990 levels, which themselves were not
strong. Car production was the lowest for any
calendar year since 1982, the last recession. Plant
closings and layoffs became more common as
companies downsized in an effort to eliminate
excessive domestic production capacity.

Monthly Labor Review May 1992

i



Producer Price Indexes, 1991

paper turned down as domestic demand was off
from advertisers, newspapers, and magazines.
Prices for coated paper dropped as producers
faced competition from Canadian and European
imports. Following a drop of 11.5 percent in
1990, woodpulp prices plummeted nearly 24 per-
cent during 1991 as domestic demand fell sharply.
Paperboard prices inched up in 1991, however, as
a rebound in the second half of the year offset a
decline in the first half.

The index for durable manufacturing materi-
als fell 3.7 percent after edging down 0.1 percent
during 1990. The index for steel mill products
dropped 3.6 percent, prompted in large part by
low demand from the automotive and construc-
tion industries; higher inventories which had been
accumulated in response to the anticipation of
labor problems in midwinter also limited de-
mand. Prices fell faster than in the previous year
for hot and cold rolled steel sheets and for
semifinished steel mill products. Hot rolled steel
bars continued their sizable declines. Prices for

“ cold finished bars fell after edging up in the
preceding year.

World prices for nonferrous metals plummeted
in 1991. The former Soviet Union boosted exports
of aluminum, copper, and zinc, despite falling
prices, to obtain hard currency to help deal with dire
domestic economic problems. (Nonferrous metal
exports are second only to oil as a source of foreign
currency for the former Soviet Union.) Prices for
domestic output were also down because of weak
construction activity and slowdowns in the auto-
motiveand aerospace industries. Primary aluminum
prices dropped 25 percent after showing little net
change in the previous year. Japanese demand for
U.S. aluminum ingot was sharply higher, however,
partly because the weaker American dollar lowered
prices to foreign importers. Prices for aluminum
mill shapes, primary copper, copper mill shapes,
and primary lead decreased faster than in 1990.
Copper price declines, however, were limited by
continued high demand from the Far East and
fewer production problems in Zaire, Peru, Chile,
and Canada. The United States became anetexporter
of copper for the first time in half a century. Price
declines slowed for primary zinc, gold, silver, and
platinum.

Table 5. Annual percent changes for selected intermediate and crude materlals other
than foods and energy in the Producer Price Index, 1987-91
Index . 1987 1988 1989 1990 1991
Intermediate goods other than
foods and energy . 52 72 09 19 -08
Nondurable manufacturing
materials . 78 114 -8 -48
Basic inorganic chemicals - 18 38 56 -15
Petrochemicals 424 36.2 -185 -244
Plastic resins and materials . 14.9 19.0 -12.0 -122
Sythetic fibers 22 67 7.0 -2.0
Finished fabrics 48 43 38 12
Leather. 19.7 78 55 -68
Paper . . 48 115 a -3.9
Durable manufacturing materials 11.6 10.1 -3.2 -37
Stee! mill products . 59 63 12 -36
Aluminum mill shapes 14.2 20.6 -64 -57
Copper and brass mill shapes . . 52.2 226 -13.9 -46
‘Construction materials 42 5.6 25 8
Fabricated structural metal
products... 46 a4 32 -5
Nonferrous wire and cable . 23.9 183 -39 -29
Heating equipment. . -3 60 55 9
Softwood lumber 77 “1 46 12.0
Ph wee 3.6 5 17 93
Millwork - 46 29 46 63
Concrete products . cence 3 8 15 17
Crude nontood materials less
energy .... 22.6 75 -36 8 ~8.0
Iron and steel scray 42.7 135 - 156 56 -13.7
Nonferrous scrap . 50.9 26.9 -15.6 7 ~17.2
Nonferrous ores 173 13.7 = 20.9 ~52 - 18.9
Raw cotton...... 147 -87 15.7 124 - 23.7
Cattle hides 292 -110 26.8 -105 -19.4
Wastepaper . 175 -147 -47 -118 -175
Note: Data are calculated on a December-to-December basis.

14 Monthly Labor Review May 1992



Craig Howell,
William Thomas,
Roger Burns,
and

Jaclyn Shend

Craig Howell, William
Thomas, Roger Burns, and
Jaclyn Shend are
economists in the Office of
Prices and Living
Conditions, Bureau of
Labor Statistics.

Recession, energy prices ease
producer price inflation, 1991

The weak U.S. economy had a pervasive effect

on price movements in 1991;

energy indexes plummeted at all stages of processing,
after increasing sharply in the previous 2 years

down broadly in 1991, after registering

substantial advances a year earlier. The
Producer Price Index (rn for Finished Goods—a
measure of changes in selling prices charged by
domestic producers of items such as meats,
gasoline, apparel, and trucks—edged down 0.1
percent from December 1990 to December 1991,
following an increase of 5.7 percent in the preced-
ing year. Similarly, the Intermediate Goods Price
Index—which focuses on price movements for
items such as animal feeds, diesel fuel, yams, and
motor vehicle parts—moved down 2.6 percent in
1991 after a 4.3-percent rise the year before. Even
more dramatic was the turnabout in the index for
Crude Materials for Further Processing—a cat-
egory encompassing such basic items as grains,
crude oil, raw cotton, and ores—which switched
from a climb of 6.0 percent in 1990 to a slump of
11.6 percent a year later. (See table 1.)

A dramatic reversal in energy prices accounted
for most of the differences between 1990 and
1991 movements for each of the three major
stage-of-processing categories. However, many
other kinds of goods also contributed a share.

Among finished goods, the index for energy
swung from an upward surge of 30.7 percent in
1990 to a drop of 9.6 percent in 1991. Consumer
food prices also turned down, declining 1.6 per-
cent, after rising 2.6 percent in 1990. The index
for finished goods other than foods and energy,
sometimes referred to as the “core” or “underly-
ing” rate of inflation, slowed from a climb of 3.5
percent in 1990 to 3.1 percent; within this cate-

P= received by domestic producers turned

6 Monthly Labor Review May 1992

gory, the increase in capital equipment prices
decelerated more than did the advance for con-
sumer goods.

Among the categories for intermediate and
crude goods, energy prices turned down sharply.
Prices for intermediate foods and feeds inched
down only slightly, foliowing a larger drop in
1990, while the crude foodstuffs index decreased
more in 1991 than in the preceding year. Prices
for intermediate goods other than foods and en-
ergy fell less than 1 percent, after a rise of nearly
2 percentin 1990. Basic industrial material prices
declined considerably, following a small rise in
1990.

Both the dramatic late 1990 rise and the 1991
fallin energy prices reflected the impact of events
in the Middle East. The Iraqi invasion of Kuwait
in August 1990 prompted widespread fears that
oil supplies would be seriously disrupted by an
outbreak of military hostilities in the Persian Gulf
region. Crude petroleum prices consequently were
bid up substantially. The flow of oil continued
much as before, however, largely because Saudi
Arabia boosted its own output to make up for the
cutoff of supplies from Iraq and Kuwait. The
rapid success of the allied air campaign in Janu-
ary 1991 quickly erased fears of major oil supply
interruptions, resulting in a sharp drop in prices
for petroleum and petroleum products.

The continued weakness of the economy, both
in this country and in many other nations, had a
less spectacular but more pervasive effect on
price movements in 1991. The coincidence of the
beginning of the economic slowdown in July


percent for fourth class library rate mail to 30.9
percent for second class nonprofit rate mail. Other
large increases in 1991 were recorded for domes-
tic deep sea freight transportation (6.4 percent)

and electric power utilities (4.5 percent). In con-
trast, declines were registered for the collection of
scrap and waste materials (14.3 percent) and tour
operators (3.9 percent). o

Equal pay: the double meaning

Although equal pay seemed to be making a work-related demand, the
thetoric surrounding it was rooted in an understanding of social roles that
assigned high wages and good jobs to the men who supported families. The
slogan respected job segregation and limited wage comparisons by suggesting
that segregated work could not and should not earn male pay. It supported the
notion that comparing female to male pay was appropriate only for those
women who were in fact performing the same jobs as men, and thus made it
possible to retain one’s self-respect at the lower wage typical of women’s
jobs. When occupational segregation broke down, even temporarily, as it did,
for example, during World War I, inevitable wage tensions resulted. The
Women in Industry Service noted that women who had formerly been
satisfied with much lower wages protested when they discovered they eamed
less than men doing the same jobs. The service recorded the ‘discontent and
ill feeling... which resulted in careless work’ that was characteristic of
women with ‘good habits of work’ who were taken on at 20 cents an hour only
to discover that ‘young boys with no training at all’ were hired in at 31 cents
an hour. As long as it was sustained by occupational segregation, equal pay
for equal work restricted comparisons between men and women workers by
implying that those who did not work alongside men could not expect to
compare themselves to them.

—Alice Kessler-Harris

A Woman’ s Wage: Historical Meanings
and Social Consequences (Lexington, KY,
The University of Kentucky Press,

1990), pp. 89-90.

Monthly Labor Review May 1992

17



Producer Price Indexes, 1991

the start of the new model year, but fell thereafter
as a sign of a weak economy.

Aluminum base scrap prices dropped 26.9
percent over the year after decreasing much more
moderately in the year before. The index for
copper base scrap turned down 9.4 percent, fol-
lowing an increase in the prior year. Overall,
prices for nonferrous metal scrap fell nearly 20
percent in 1991. Nonferrous scrap prices tend to
follow closely those of primary metals due to easy
substitutability; if the price differential between
primary and scrap metal is not maintained, cus-
tomers will opt for the lower priced item. The
large inflow of primary nonferrous metals from
the former Soviet Union drove prices down for
primary metals, which in turn adversely affected
scrap prices. Furthermore, the automotive, aero-
space, and construction industries were hard hit
by the recession. Domestic automobile sales were
at their lowest level since 1983, cuts in defense
spending substantially reduced orders for aircraft
and related equipment, and building activity de-
creased to recessionary levels.

Prices for nonferrous metal ores dropped nearly
20 percent after a smaller decrease in 1990. The
major component of this index, copper ores,
slumped 17.6 percent in the wake of a 3.8-percent
decrease a year earlier. Copper ore output in 1991
increased 600,000 tons over 1990 levels, with the
opening of new mines and expansion of existing
ones. This industry, however, encountered bottle-
necks between mine production and smelting and
refining during the year because copper mine
production sometimes exceeded the capacity of
copper smelting and refining operations. As a
result, the mining industry experienced a sharp
drop in prices for copper ores,

Raw cotton. During the first 6 months of 1991,
the raw cotton index shot up at an annual rate of
approximately 25 percent as U.S. cotton exports
increased. In addition, bad weather conditions in
early spring from Georgia to Texas, as well as in
Arizona and California, slowed cotton planting.
During the second half of 1991, however, the
index for raw cotton dropped at a 53.7-percent
rate. The higher market prices for cotton which
prevailed during the first half of the year encour-
aged the planting of larger acreages; overall cot-
ton planting thus rose 13 percent in 1991. Demand
for American exports, meanwhile, slowed in the
fall because of record world production levels.
Thus, after climbing 12.4 percent in 1990, the
index for raw cotton fell 23.7 percent—the largest
drop since 1981.

Cattle hides. 1n 1991, the index for cattle hides
declined 19.4 percent, nearly twice as much as in
the preceding 12 months. The total number of

16 Monthly Labor Review May 1992

cattle slaughtered was about 2 percent below
1990 levels, despite higher beef production, which
resulted from an increase in average weight. In
addition, overall world demand for leather sub-
stantially declined in 1991, and tanners cut back
their hide inventories to lower their costs. This
led to the largest decline for the cattle hides index
since 1974,

Wastepaper. Prices for wastepaper continued
on a downward trend that began in 1988 as the
index dropped 17.5 percent in 1991—even faster
than in any of the preceding 3 years. Mandatory
recycling increased to the point where some juris-
dictions, particularly in the Northeast, actually
paid to have their low grade wastepaper hauled
away. At the same time, however, existing physi-
cal plants were still unable to utilize recycled paper
efficiently. In most cases, it is less expensive to
manufacture products from virgin fiber than it is
tomake them from recycled materials, because the
latter requires special processing costs. Rapid de-
clines in pulp prices further weakened the demand
for high-grade pulp substitute wastepaper.

Selected industries

Mining. The Producer Price Index for the net
output of the domestic mining sector fell 12.5
percent in 1991, following increases of 14.0
percent in 1990 and 9.6 percent in 1989. In 1991,
all mining categories declined, except nonmetal-
lic mining; this index rose 1.3 percent, continuing
its modest upward trend. Decreases over the year
were led by the oil and gas extraction industry
group, which fell about 16 percent following 2
years of advances. The metal mining industry
group also declined about 16 percentin 1991.The
indexes for the coal mining industry groups edged
down after rising in other recent years.

Manufacturing. The Producer Price Index for
the net output of the domestic manufacturing
sector dipped 0.9 percent in 1991. A large de-
crease for the petroleum refining industry group
(26.0 percent) and much smaller declines for the
industry groups for primary metals, paper, and
chemicals more than offset advances for most
other industry groups. Leading the increases in
1991 was the industry group index for tobacco
manufactures, which rose 14.3 percent. The lum-
ber and wood products industry group index
turned up 5.3 percent, after edging down a year
earlier. Most other industry groups rose less than
4 percent.

Other. Among other industries, the index for
the U.S. Postal Service rose 19.8 percent on the
strength of hikes in February, ranging from 2.6



domestic consumption. American tobacco prod-
ucts continued to enjoy a reputation for premium
quality in many countries; the health concerns
that have limited cigarette usage here are not so
prominent abroad. Producers have thus been abie
to boost prices regularly without encountering
significant buyer resistance. Exports now ac-
count for about 27 percent of domestic output,
compared with less than 10 percent in 1985.

Prices received by domestic producers of al-
coholic beverages climbed 5.5 percent in 1991,
far more than in other recent years. This advance
occurred entirely in January, when distillers and
brewers raised their own prices at the same time
that higher Federal excise taxes took effect. (Ex-
cise taxes do not represent revenues retained by
producers and are therefore excluded from PPI
calculations.) This index drifted slightly lower
for the remainder of 1991.

Prices for both prescription and over-the-
counter drugs continued to climb at a faster pace
in 1991 than prices for most other consumer goods.
However, whereas in most recent years, price in-
creases for prescription drugs have been about
double those for over-the-counter drugs, the spread
was considerably smaller in 1991; prescription
drug prices rose 7.1 percent over the year (less
than 1990's increase of 8.1 percent), while over-
the-counter drugs moved up 5.9 percent (compared
with 4.2 percent a year earlier). Price increases
have generally been more moderate for over-the-
counter drugs because of competition from inex-
pensive generic counterparts to national name
brands. Prescription drugs, by contrast, are shielded
from competition by patents; pharmaceutical firms
can therefore keep prices high enough to recover
the research, development, and testing costs of
both successful and unsuccessful ventures. At the
end of 1991, the indexes for prescription drugs
(221.2) and over-the-counter drugs (169.5)
(1982=100) were both far above the level for fin-
ished goods overall.

Publications. Indexes for books and for both
newspaper and periodical circulation increased
considerably less in 1991 than in most other
recent years. Movements for 1991 ranged be-
tween 2.6 and 4.3 percent for these categories,
compared with 4.0- to 9.0-percent advances a
year earlier, The recession had a strong impact
on publication prices, partly because spending
on these items can be cut back when consumers
are uncertain about their economic prospects. At
the same time, advertising revenues for newspa-
pers and magazines were also adversely affected
by the recession; one result was a drop in the
number of newspapers and periodicals being
published. However, export markets for Ameri-
can publications expanded, partly because of

improved international copyright protections.
Book price increases were checked by lower
State and local government expenditures for
textbooks.

Intermediate goods

After moving up 1.9 percent in 1990, the Pro-
ducer Price Index for intermediate materials less
foods and energy tumed down 0.8 percent in
1991—+the first decline in 6 years (table 5). Most
categories of manufacturing materials decreased
during the year, and price advances for con-
struction materials were smatler than those in
1990.

Manufacturing materials. The index for non-
durable manufacturing materials fell 4.8 percent,
following a 3.7-percent rise in 1990. Prices for
materials derived from petroleum turned down
in line with crude oil prices, as oil market pres-
sures were relieved following the end of the
Persian Gulf war. Prices for petrochemicals,
plastic resins and materials, paint materials, and
synthetic rubber fell sharply following substan-
tial increases in the previous year. Markets for
ethylene and plastic resins and materials were
additionally troubled after producers expanded
production capacity. Demand for ethylene be-
came sluggish both domestically and abroad.
Synthetic rubber demand surged during the Gulf
war and plummeted after the conflict ended.
Prices for plastics were restrained by new envi-
ronmental regulations covering plastic products;
additionally, demand remained sluggish because
of the continuing recession.

Prices also turned down for intermediate ba-
sic organic chemicals, other basic organics, other
basic inorganics, fertilizer materials, and ined-
ible fats and oils. However, price declines for
alkalies and chlorine were milder than in the
prior year, and price advances accelerated for
medicinal and botanical chemicals.

Synthetic fiber prices dropped more in 1991
than in 1990, and processed yarns and threads
turned down after rising in the previous year.
Gray fabric prices moved up a little faster than
in 1990, however, and finished fabric prices ad-
vanced about as much as in the preceding year.
Leather prices turned down sharply as
recessionary pressures and a general decline in
world demand continued while supplies remained
more than ample.

Producers of many pulp and paper products
cut their selling prices considerably to retain
market share in the face of weak domestic mar-
kets and production overcapacity. Foreign de-
mand was relatively strong, however. Prices for

Monthly Labor Review May 1992

13



part to a mild winter, and the resultant high stocks
of natural gas led to the downward movement in
the index for natural gas to electric utilities in the
early part of 1991; this index then surged nearly
15 percent in November, resulting in a net in-
crease of 2.4 percent for the year.

The industrial electric power index registered
a 5.4-percent increase in 1991, compared with a
rise of 4.1 percent in the previous year. Commer-
cial power rates moved up 3.2 percent, nearly the
same as a year earlier. Plummeting oil prices
exerted virtually no downward pressure on rates
for electricity, because only 5 percent of electrical
output is generated from oil.

Finished energy goods. Lower prices for crude
petroleum were reflected in substantial decreases
in the prices for both gasoline and home heating
oil. Gasoline prices fell 25.1 percent in 1991, after
rising 45.2 percent in 1990 and 9.2 percent in
1989, Although gasoline stocks were relatively
Jow during much of 1991, the sluggish economy
restrained both business and consumer demand
for gasoline. Prices for home heating oil dropped
30.5 percent, following a 28.1-percent advance a
year earlier and a 33.9-percent climb in 1989. A
mild winter led to excessive fuel inventories and
consequent heavy price discounting. In their first
year of calculation, the new index for residential
electric power rose 5.1 percent and the index for
residential natural gas moved up 0.7 percent.

Foods

Prices received by domestic producers for fin-
ished consumer foods declined 1.6 percent from
December 1990 to December 1991 (table 3). This

decrease followed rises of 2.6 percent in 1990 and
5.2 percent in 1989. The intermediate foods and
feeds index edged down 0.1 percent after falling
1.3 percent in the preceding year. At the farm
level, the Producer Price Index for crude food-
stuffs and feedstuffs dropped 5.6 percent after a
4.2-percent decline in 1990.

Livestock, meats, and poultry. Much of the de-
celeration in prices for crude and finished foods
was attributable to lower demand for and higher
production of livestock and meats. The index for
livestock fell 14.5 percent in 1991, the largest
annual decline since 1970. Prices for cattle de-
creased more than 10 percent, following a moder-
ate increase a year earlier. Hog prices dropped
nearly 20 percent, much faster than in the preceding
year.

The production for both beef and pork in
1991 rose from the previous year, 1 percent for
beef and 4 percent for pork. The combination of
low demand for red meat and an increase in
production drove the beef and veal index down
12.3 percent over the year, after an increase of
nearly 10 percent in the prior 12 months. Favor-
able returns to hog farmers for most of the year
led to an increase in pork production. Following
double-digit advances in both 1989 and 1990 ,
prices for pork dropped nearly 20 percent in
1991. Overall, the index for meats fell 12.3 per-
cent in 1991, the first calendar year decline since
1987.

In response to good consumer demand and
favorable profit margins, chicken production once
again expanded in 1991. This led to small over-
the-year declines in the prices for both live and
processed chickens. Despite higher production,

Table 3. Annual percent changes for selected food items In the Producer Price Index,
1987-91
Index 1987 1988 1988 1990 1991
Finished consumer foods... . . -02 57 52 26 -16
Beet and veal. . 37 12.8 56 96 -123
Pork......... bene - 164 1 20.0 125 -18.2
Fresh fruits and vegetables 61 8 -7.0 0 -173
Dairy products ........ -4 44 143 “74 65
Bakery products... =... 44 76 6.0 32 43
Intermediate foods and feeds 55 108 0 -13 =A
Flour... es... 37 213 4 -185 18.4
Prepared animal feeds 13.5 12.7 -88 -4.0 27
Crude foodstuffs and feedstuffs ..... 18 142 28 -42 ~56
Cattle... 11.3 53 78 65 -13.6
Hogs . —223 -49 17.6 8.2 - 19.5
Oilseed: 16.4 29.1 ~22.4 8.0 - 10.6
Fluid milk -48 6.0 19.8 - 26.2 17.4
Wheat 10.8 35.7 8 - 34.4 37.4
Com... 10.3 40.6 -115 ~8 22
Nove: Data are calculated on a December-to-December basis,

Monthly Labor Review May 1992 9



Producer Price Indexes, 1991

Table 2. Annual percent changes for selected energy items in the Producer Price
Index, 1987-91
Index 1987 1988 1989 1990 1991
Finished energy goods . . see 112 -36 95 30.7 -96
Gasoline... 2.6... eee rece ees 214 -3.3 9.2 45.2 - 25.4
Home heating oil . 25.3 ~ 12.5 93.9 28.1 - 30.5
Residential power... .... — _ _ — 51
Residential gas ..............- = - = - 7
Intermediate energy goods ........ 9.0 -44 10.6 218
Liquefied petroleum gas ........ 27.4 -22.2 25.1 76.8
Residual fuels .... vee 26.6 -19.2 298 428
Diesel fuel ......0.. 2... 29.7 -13.3 35.9 32.8
Industrial power -2.4 8 3.3 at
Commercial power... 2... 0+... -2 6 3.0 3.3
Crude energy materials . . 107 -95 179 19.1
Crude petroleum... . 28.8 = 18.1 35.0 32.6
Natural gas (to pipelines). -32 4 35 65
Coat..... rrereens ~44 -14 27 7
Note: Data are calculated on a December-to-December basis. Dash indicates data not available.

1990 and 17.9 percent in 1989 (table 2). Prices for
intermediate energy goods (such as liquefied pe-
troleum gas) fell 11.6 percent in 1991, following
a21.8-percent advance a year earlier, and a 10.6-
percent climb the year before. The index for
finished energy goods (such as home heating oil)
declined 9.6 percent, after jumping 30.7 percent
in 1990 and 9.5 percent in 1989.

Crude energy materials. The index for crude
petroleum plunged 30.4 percent in 1991 after
advancing about 33 percent in each of the preced-
ing 2 years. Nevertheless, the December 1991
index was still 19.2 percent higher than it had
been in July 1990 immediately before the Persian
Gulf crisis began. During January 1991, posted

prices of crude oil were in constant turmoil be-.

cause of political instability in the Gulf. By hap-
penstance, the pricing date for the eri fell on
January 15, which was also the deadline set by
President Bush for Iraq to withdraw from Kuwait.
(In general, prices are reported for the Tuesday of
the week containing the 13th day of the month.)
The war began the next day. Because the PPI
pricing date virtually coincided with the peak of
prices in January, the crude oil index for January
was up 10.8 percent from its December level.

In February, however, prices for crude oil
declined 27.0 percent, as the early success of air
operations among allied troops calmed fears of
major supply interruptions. Petroleum prices fell
another 15.7 percent in March as Desert Storm
concluded with a brief ground campaign. Oil
prices then increased for several months before
retreating again at the end of the year.

Domestic production of crude oil edged up
slightly in 1991 over 1990 levels. Imports of
crude oil started rising at the beginning of 1991,

8 Monthly Labor Review May 1992

after falling for the last 3 months of 1990. These
imports were 23.9 percent higher at the end of
1991 than in December 1990. By the end of 1991,
production of crude oil by the Organization of
Petroleum Exporting Countries (oPpEc) was at its
highest level since the Persian Gulf crisis began,
in part because of Saudi Arabia’s determination
to keep world prices low to assist countries suf-
fering economic contractions.

The index for natural gas to pipelines fell 1.5
percent after 3 years of modest increases; be-
cause this index is lagged 1 month, the compari-
son is from the January 1991 index (for
December 1990 prices) to the January 1992 index
(for December 1991 prices). Prices were down
sharply through the first 9 months of the year,
reflecting the combined impact of a warm win-
ter in much of the country, lessened industrial
demand due to the recession, and competition
from falling oil prices. However, the index re-
bounded somewhat at the end of the year. Coal
prices declined 1.9 percent in 1991 after rising
0.7 percent a year earlier. Overcapacity in pro-
duction, combined with large stockpiles of coal
left over from 1990, contributed to the downward
movement.

Intermediate energy goods. Declines in the
prices for liquefied petroleum gas, jet fuel, re-
sidual fuel, and diesel fuel ranged between 24 and
39 percent. The newly developed Producer Price
Indexes for both commercial and industrial natu-
ral gas declined slightly in 1991. Natural gas
prices charged to many large industrial users are
tied, in part, to the price of fuel oil. Consequently,
declines in the price of fuel oil just after the first
of 1991 contributed to lower natural gas prices.
However, lowered demand for natural gas, due in


1990 and the Iraqi invasion of Kuwait immedi-
ately thereafter encouraged the notion that the
resolution of the Kuwaiti crisis would end the
slowdown as well. With a resurgence of con-
sumer confidence in the wake of the Desert Storm
operation, there was a widespread perception by
midyear that the slowdown was over.

But the sluggishness which dominated the
remainder of 1991 failed to match the usual
profile of recovery from an economic setback, as
many of the more serious problems underlying
the recession reemerged with relatively little im-
provement. Consumer spending failedto rebound
vigorously, partly because of the continuing
burden of consumer debt incurred in recent years
and partly because of caution due to fears of
potential layoffs. Rapid drops in interest rates,
while assisting homeowners who refinanced their
mortgages, also reduced the spending power of
consumers who held significant amounts in cer-
tificates of deposit and other savings instruments
and accounts,

Financial institutions were often reluctant to
grant business loans because of regulatory pres-
sure to tighten their credit standards after their
financing of many real estate development projects
soured. Businesses frequently postponed capital
expansion projects, preferring to improve their
productivity by reducing payrolls rather than by
investing in new machinery. Consequently, capi-
tal utilization rates for manufacturing stayed be-
low 80 percent all year, leaving little need for new
capacity.

Residential construction activity picked up
somewhat, as lower mortgage interest rates and
declining home prices in some parts of the coun-
try made housing more affordable; however, of-
fice building construction remained depressed in

the wake of severe overbuilding in the 1980's. In
addition, defense expenditures were cut back as
Desert Storm and the collapse of the former
U.S.S.R. reduced international tensions, while
State and local government spending was re-
strained by lower tax revenues and declining
Federal payments.

The American dollar weakened considerably
against several major foreign currencies, as lower
USS. interest rates induced more foreign invest-
ment to flow back abroad. While the weaker
dollar stimulated American exports, this was off-
set somewhat by falling demand from other coun-
tries, suffering their own economic downturns.
Imports continued to present formidable compe-
tition for many domestic goods, further limiting
the ability of American firms to raise prices in
hopes of restoring profit margins.

Although most closely watched indicators of
future economic conditions signalled a strong
recovery in 1991 which failed to materialize, one
leading indicator which remained weak all year
was the pp! for basic industrial materials. This
index declined in most months of 1991, reflecting
the sluggishness of the manufacturing sector.

Energy

Energy indexes plummeted at all stages of proc-
essing in 1991, after increasing sharply in each of
the preceding 2 years. Dramatic advances had
been recorded for petroleum and petroleum prod-
ucts in 1990 in the aftermath of the Iraqi invasion
of Kuwait; the ending of the conflict with only
minimal disruption in supplies caused an em-
phatic reversal in energy prices in 1991.

In 1991, the crude energy materials index fell
16.7 percent, after advancing 19.1 percent in

by stage of processing, 1987-91

Table 1 Annual percent changes for major categories of the Producer Price Index,

Index 1987 1988 1989 1990 1991
Finished goods... . 22 40 49 57 -0.1
Foods... .. -2 57 52 26 -16
Energy . 11.2 -36 95 30.7 -96
Other... ceeeees a4 43 42 35 34
Intermediate materials, supplies,
and components... . 54 56 23 43 -26
Foods and teeds . . 55 10.8 0 ~13 -4
Energy... 0... eee eee reece eee 9.0 -44 10.6 21.8 -11.6
Other .. a ceeeeeee 52 72 9 19 -8
Crude materials for further
processing 89 31 7A 6.0
Foodstuffs and feedstuffs .. 18 14.2 28 -42
Energy . - . 10.7 -95 17.9 19.41
Other .. . 22.6 75 3.6 6

Note: Data are calculated on a December-to-December basis:

Monthly Labor Review May 1992 7