Producer prices tumbled a second consecutive month during October, the first back-to-back decline in three years, the Labor Department said Thursday.

Analysts, however, dismissed the report as "misleading" and said inflationary pressures continue building.The Producer Price Index for finished goods posted a 0.5 percent decrease last month, matching its September decline. The last time prices fell two straight months was in June and July 1991, Labor said.

Economists were generally projecting October producer prices would advance a mild 0.3 percent overall.

"The headline numbers are completely misleading," said Asha Bangalore, an economist for Northern Trust in Chicago. "The inflation picture has not changed at all."

Helping drive down the PPI were the biggest drop in passenger car prices since last October and the sharpest fall in heavy trucks since 1984.

But analysts challenged the auto figures and the government's way of calculating the data, including adjustments it makes for seasonal variations.

"Car prices didn't go down," said Eugene Sherman, chief economist for M.A. Schapiro & Co. in New York. "I think you have some statistical quirks that do not reflect inflationary pressures."

The surprising drop was reported just five days before Federal Reserve policymakers meet to discuss whether to hike short-term interest rates a sixth time this year in order to prevent economic overheating and runaway inflation.

Bangalore and Sherman said they think the central bank will tighten policy Tuesday.

"The Fed cannot ignore that (price pressure) and will not," Bangalore said. "The battle against inflation will not be postponed. They will definitely raise rates."

The Labor Department said producer prices for food slipped 0.2 percent and energy prices sank 1.2 percent.

Excluding volatile food and energy components, prices producers paid for all other goods fell 0.5 percent. This so-called "core rate" of inflation inched up 0.1 percent in September.

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Producer prices so far in 1994 have increased just 1.2 percent.

The October PPI said prices for crude goods fell 0.6 percent and rose 0.3 percent for intermediate goods.

The 0.2 percent decrease in producer prices for finished food products followed a 0.2 percent decline in September. Declines were registered for fresh fruits and melons, eggs, milled rice, fish, pork, beef and veal. Prices rose for vegetables, pasta, coffee, poultry and cooking oils.

The 1.2 percent decrease in energy prices followed a 2.9 percent decline in September. Decreases continued at a slower pace for home heating oil and gasoline. Prices for residential electricity turned up. Prices for residential natural gas sank more than they had in September.

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