Wholesale Prices Climb Slight 0.1% : Energy Cost Rise Canceled by Drop in Autos, Food

Falling auto and food prices canceled out higher energy costs in February, holding the monthly increase in wholesale prices to a minuscule 0.1%, the Labor Department said today.

The government also announced industrial production rose 0.5% in February, marking the fifth straight monthly increase, while business inventories in January grew a seasonally adjusted 0.9%, the biggest rise in 7 1/2 years.

White House spokesman Marlin Fitzwater said the reports “show a growing American economy that continues to produce more goods, all without the pain of crippling inflation.”

Nevertheless, economists said they were sticking with forecasts the inflation rate will hit 3.5% to 4% this year, far higher than the 1.1% of 1986.

Out of Doldrums

They added that the industrial production and inventory reports show the manufacturing sector has emerged from its doldrums but now is feeding solely off a buildup in inventories.

Factories could shut down again unless domestic sales rise or exports improve, they warned.

The producer price index tracks the cost of wholesale goods as they move from fields and farms through their initial processing in factories and finally to the nation’s markets as finished goods.

February’s 0.1% growth follows a 0.6% increase in January and came about largely because increases and decreases balanced each other.

Finished energy goods rose 4% in February, for example, as gasoline jumped 5.5% in price, No. 2 fuel oil was up 3% and the cost of natural gas rose 1.8%.

Vegetables Drop 8.8%

That was offset a bit by a 0.5% drop in food prices. Fresh vegetables led the charge, dropping 8.8%, while other price decreases were recorded for bakery goods, processed poultry, dairy products and roasted coffee.

Beef and veal cost 2.3% more, mainly because better than normal weather allowed steers to get fatter and thus command a better price at slaughter. Prices for fresh fruit, eggs, fish and soft drinks also rose.

In addition, prices for passenger cars went down 3.4% and the wholesale price for light motor trucks fell 1.3%. The Labor Department credited the drops to attractive rebate and discount loan packages, such as the 3.9% financing rate General Motors and Ford offer on two-year loans for some of their models and Chrysler’s 3.7% rate.

Clothing, Shoe Prices Fall

Prices for women’s clothes, leather footwear, tires and gold jewelry all dropped, while wholesale prices rose for tobacco products, household furniture and silver jewelry.

The price of crude goods rose 1.8% after having gone up 2.9% in January. In that category, food and feed stuffs showed no change and crude petroleum prices rose 4.4%, far below January’s 19.7% advance.