Wholesale Prices Increase Modest 0.2% During July

Wholesale prices rose a modest 0.2% last month as large jumps for gasoline and home heating oil were offset by slightly lower food prices, the government said today.

The July increase followed an identical 0.2% jump in June and a 0.3% rise in May, bolstering Reagan Administration predictions that inflation will slow in the second half of 1987.

However, while the July increase for finished goods showed only a slight gain, prices at the intermediate level, including those for fertilizer, cement products and plywood, rose a much steeper 0.8%, indicating a possible acceleration of inflation later in the year.

Annual Rate of 4.2%

So far this year, inflation at the wholesale level was running at an annual rate of 4.2%. Through June, the annual rate had been 4.5%. July’s increase, if it persisted for 12 months, would amount to an annual inflation rate of 2%.

The Administration is forecasting that increases in both wholesale and retail prices will slow a full percentage point by year’s end from the annualized gains recorded in the first six months of the year.

The Labor Department said wholesale food prices in July dropped 0.6% after large advances in the preceding three months. Pork prices fell 6.8%; poultry costs were off 4.8%; fruit prices dropped 3.8% and vegetable costs eased 3.5%. Beef prices were down 0.9%.

Moderate increases--less than 1%--were posted for dairy products, fish and baked goods.

Energy on Rise

Energy prices rose 1.5%. Leading the way was a 2.5% hike in gasoline prices, atop a 3% increase in June, and a second straight 4.6% price jump for home heating oil.

Natural gas prices fell 0.5% after dropping 1.8% in June.

Prices for products other than food and energy rose at the same 0.2% rate as the overall index. Capital equipment costs edged up 0.1%, consumer product costs gained 0.3% and auto prices were unchanged.

Clothing prices rose slightly, ranging from 0.1% for children’s goods to 0.6% for men’s wear.

Prices also rose for tobacco, light trucks, shoes and carpeting. Declines were posted for home electronic equipment, alcoholic beverages and cosmetics.

Led by a 50% drop in world oil prices in the first half of 1986, wholesale prices last year actually dropped by 2.5% and consumer prices rose only 1.1%.

In the last month alone, oil prices have jumped from $18 to $21 per barrel, largely as a reaction to escalating military action in the Persian Gulf and the threat to tanker traffic in Middle Eastern crude oil.

But the effect of that increase will not show up for another month in the government inflation figures, analysts said.