Advertisement

Wholesale Prices Up 0.6%; U.S. Vacation From Inflation Over

Associated Press

Sharply higher energy costs, including the steepest gasoline price spurt on record, pushed up wholesale prices 0.6% in January, the government said today in a report signaling an end to America’s vacation from inflation.

Reflecting across-the-board gains in energy prices, gasoline costs soared 15.7%, the biggest jump since the Labor Department began keeping track of wholesale prices in 1947.

Heating oil prices rose 18%, the steepest advance since a 19.6% increase in February, 1974, while natural gas prices advanced 4.2%.

The January gain, the biggest overall increase in the wholesale index since November, 1985, followed a year that saw inflation turn in its best performance in 37 years.

Advertisement

Economists suggested that January’s energy price increases would have been even higher had it not been for a milder-than-usual winter. They noted that prices began edging up in December.

Annual Rate of 7.7%

Food prices last month fell 1.8%, the second straight dip. Excluding food and energy, wholesale prices were up 0.5% in January.

Last month’s overall increase in the Labor Department’s producer price index would be equivalent to an annual inflation rate of 7.7% if maintained for 12 consecutive months.

Advertisement

That contrasts with a drop in wholesale prices of 2.5% for all of 1986. Wholesale prices in December, however, had fallen just 0.1%.

It was the collapse of energy prices in early 1986 that sent the full-year index tumbling for the first time since 1963. Indeed, only in 1949 did prices fall at a faster clip, 4.6%.

Now, it is largely because of the rebound in energy prices that economists are predicting moderately rising prices for the foreseeable future.

“I think we’re at the beginning of a substantial increase of inflation,” said Michael K. Evans, president of a private economic forecasting service. “I think we’ve pretty much run out of our luck.”

Advertisement

Increase ‘Expected’

At the White House, presidential spokesman Marlin Fitzwater said the increase “was expected” because of gains in crude oil prices. “We expect to see similar effects for several months,” he added.

In a separate report, the Federal Reserve Board said production at U.S. factories, mines and utilities rose a solid 0.4% in January, the fourth consecutive month of gains.

January’s increase stemmed from moderate gains in most sectors of the economy, with the exception of companies producing consumer goods and energy products, the central bank said.

Advertisement

But even with the recent gains, industrial output is just 0.6% higher than it was a year ago. The overall index was held back by a steep 11.6% decline in the mining sector, which includes the depressed oil and gas industry. Manufacturing output is 2% higher than it was a year ago.

In a third economic report today, the Commerce Department said a boom in car sales in December aided a strong 2.9% rise in business sales and a 0.5% reduction in inventories of goods on shelves and in back lots.


Advertisement
Advertisement