Consumer Prices Inch Up 0.2%; GNP Increases at Yearly 4.8% : Economists See Continued Growth, No Recession

Consumer prices rose just 0.2% in February and the U.S. economy expanded at a brisk 4.8% annual rate in the final three months of 1987, the government reported today.

The Commerce Department said the gross national product, the broadest measure of economic health, grew from October to December at the fastest clip in about two years.

It was the second upward revision in GNP growth. A month ago the government put GNP growth at 4.5%, up from a 4.2% original estimate made in January immediately after the quarter ended.

Today’s revisions showed more strength than previously believed in such key sectors as consumer spending, business investment and U.S. exports.

Economists said the new GNP report is one more indication that the country will enjoy continued economic growth this presidential election year without a recession.

This is a far more positive outlook than many analysts had immediately after the record market collapse last fall. Then, there were fears that worried consumers would topple the country into a new recession.

Food, Energy Prices Drop

In its report on inflation, the Labor Department said last month’s consumer prices rose a modest 0.2% due to lower food and energy costs.

Food prices fell 0.3% after rising 0.3% in January. Energy costs, which had fallen 0.7% in the preceding month, fell 0.6% last month.

So far this year, consumer prices have been increasing at a rate of 3.2%. That compares to the moderate 4.4% rate for all of 1987 and the scant 1.1% 1986 increase.

Some economists suggested that last month’s moderate food and energy cost hikes may be masking hefty increases for other goods and services.

Subtracting these two volatile categories, however, the index for all other goods and services advanced 0.2% in February after a 0.5% increase in January, when prices overall rose 0.3%.

A restrained consumer price index had been expected since the Labor Department reported that the companion producer price index, also restrained by moderating energy and food prices, had dipped 0.2% in February.

Restaurant Meals Up 0.3%

Grocery store prices fell 0.6% after a 0.2% rise in the previous month; restaurant meals were up 0.3%, the same as in January.

Pacing the drop in food prices was a 4% fall in the costs of fruits and vegetables, more than offsetting a 0.4% rise for meats, poultry and fish.

Gasoline prices fell 1.7%, down for the third month in a row. Gasoline prices had fallen 1.7% in December and 1.6% in January.

Heating oil prices were up 0.6% while the cost of natural gas and electricity rose 0.5%.

New automobile prices rose 0.3% and clothing prices fell 0.3%.

In a third report today, the Commerce Department said U.S. corporations’ after-tax profits rose 1.6% in the fourth quarter, the poorest showing since profits fell 3.7% in the first quarter of 1987. Profits were up 5.5% in the third quarter.