Consumer Prices Up 0.4% Last Month; Annual Rate at 4.5%

Consumer prices rose 0.4% in April as clothing costs gained for the second straight month and grocery prices climbed at their fastest pace in 20 months, the government said today.

Energy prices were up sharply as well, reflecting the steepest rise in gasoline prices since last August.

The overall gain, only marginally better than March’s 0.5% rise, meant that for the first four months of 1988 retail prices were up at an annual rate of 4.5%.

While this was little changed from the 4.4% for all of 1987, economists were concerned because much of the inflationary pressure has shown up in the last two months.

Analysts noted that the March rise had been the most severe since January, 1987. Last month’s 0.4% overall gain was equivalent to an annual inflation rate of 5.3%.

Inflation Fears ‘Justified’

“The general message in this report is that prices have been rising in the past two months at a faster pace and they will continue to do so,” said Bruce Steinberg, an economist with Merrill Lynch. “The fears that people have had about higher inflation are justified.”

Steinberg said that the underlying inflation rate is somewhere around 5%, about a percentage point higher than it has been for the last year.

More than one-fourth of the April gain in consumer prices came from a steep 2% jump in clothing costs, tying March for the greatest one-month gain since price records were first kept in 1947.

As was the case with March, analysts said the more expensive clothing was chiefly the result of higher priced women’s clothing lines.

Grocery store prices rose 0.8% in April, the biggest advance since August, 1986. Leading the way were sharply higher prices for beef (up 2.3%), fish (up 2.9%), and fruits and vegetables (up 1.4%).

Sharp Rise in Gas Prices

Gasoline prices climbed 1.1% last month after a 0.4% March rise. Last month’s jump was the steepest since a 3.3% rise in August. After that, gasoline prices had fallen for six straight months.

The gasoline price increases over the last two months largely reflected concern that the Organization of Petroleum Exporting Countries would agree with non-member nations to limit production.

But those talks ended in failure and world oil prices have since fallen substantially, leading analysts to believe that retail prices will soon turn downward.

New car prices were unchanged while automobile financing costs fell by 1.1%. Public transportation expenses, reflecting a jump in airline fares, rose 0.8%.