Prices rose moderately in February

March 18, 1993|By New York Times News Service

WASHINGTON -- Consumer prices climbed a moderate 0.3 percent in February, the Labor Department reported yesterday, but "core" inflation was an unnerving 0.5 percent for the second straight month.

Analysts viewed the results, combined with Friday's report of the biggest jump for producer prices in two years, as solid evidence that inflation was no longer on the wane.

"I think we've troughed out," said Alan C. Lerner of the Bankers Trust Co., referring to an inflation rate that retreated from 6.1 percent in 1990 to 3.1 percent in 1991 and to 2.9 percent last year.

Few analysts, however, believe that a sharp pickup in inflation islikely soon.

A second report yesterday showed that industrial production rose inFebruary for the fifth straight month and that gains for November, December and January were a bit higher than previously estimated. The report, from the Federal Reserve, showed that industry ran at 79.9 percent of capacity, the highest rate since September 1991.

The news of higher-than-expected core inflation initially sent bond prices down. But the market recovered, apparently as traders and investors realized that apparel accounted for much of the increase. Clothing prices, which account for 6 percent of the Consumer Price Index, are notoriously volatile but are included in the underlying, or core, inflation rate. Food and energy prices are excluded.

In another reassuring sign, all major categories except apparel posted smaller price increases in February than in January.

"We do not feel that the two-month, 0.5 percent increases in core consumer prices is the beginning of a new upward-drift pattern," said Donald E. Maude, an economist with Scotia McLeod. "We expect a significant moderation in these prices over the months immediately ahead."

Other analysts agreed, noting that the price index has tended to post sizable increases in the first months of recent years. Allen Sinai, an economist for the Boston Company, said that the best )) news on inflation was probably past but that "a permanent and significant reacceleration of inflation is unlikely."

This view is based on generally weak economies abroad, an apparent slowdown of American economic growth and slow increases here in unit labor costs.

But economists see a potential for higher inflation if the Clinton administration moves to raise the minimum wage, engages in protectionist trade policies and seeks to provide health insurance for 35 million people now without it.

Apparel prices, with a 1.5 percent jump, accounted for about one-quarter of the overall rise in the price index. Other significant influences on the index were a sharp downturn in the prices of fresh fruits and vegetables, a 2.2 percent increase in airline fares and a decline in energy services that more than offset an increase in gasoline.

For urban consumers, the price index stands at 143.1. That means that a basket of goods and services that cost $10 in the 1982-1984 base period now costs $14.31.

The 0.4 percent rise in industrial output -- the production of the nation's factories, mines and utilities -- was expected. Manufacturing output rose 0.3 percent -- after an 0.8 percent rise January -- despite a drop in auto assembly.

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