Energy Costs Push Consumer Prices Up 0.5%

Consumer prices jumped 0.5% in August, as still-rebounding energy prices overwhelmed a small drop in food costs, the government reported today.

The increase in the Labor Department’s consumer price index followed a 0.2% increase in July and was the steepest climb since a 0.7% rise last January.

For the first eight months of 1987, inflation at the retail level has been running at an annual rate of 5.1%, nudged up by the August figures from the 5% level that had prevailed through July.

The latest statistics came as a surprise to many economists, who had predicted August inflation in the 0.2%-to-0.3% range.

The August increase alone, if continued for 12 consecutive months, would yield an annual inflation rate of 5.8%.

‘We Think It’s Temporary’

White House spokesman Marlin Fitzwater told reporters, “It’s not the kind of good news I like to give, but we do think it’s temporary.”

Despite the August increase, Fitzwater said recent data indicates that inflation is running at a 4% pace.

Groceries were one of the few areas to show a price decline in August, falling 0.1%. However, all foods and beverages were up 0.1%, including a 0.3% increase in restaurant meals. Fruits and vegetables fell 2.3%. In July, food prices had fallen 0.2%.

Gasoline prices rose 3.1% after a 1.1% increase in July.

It appears that 1987 will register the biggest gain in inflation since 1981, when prices went up 8.9%. By contrast, consumer prices for all of 1986 increased a minuscule 1.1%.

Most of this year’s increases have come from increasing energy costs, still rebounding from the 1986 collapse of world oil prices, and from increasing import prices attributed to a weaker dollar.

Prices for goods other than energy and food, the category that most reflects higher import prices due to a weaker dollar, rose 0.4% in August, up from a 0.3% rise in the previous month.