Retail Prices Rise 0.4%, Stirring Fears of Inflation

Retail prices increased 0.4% in April, the Labor Department said Friday, providing another sign that inflation is once again on the march.

The April increase, on the heels of a 0.5% jump the previous month, had been widely expected, and investors took it in stride. Stock prices were mixed, and interest rates rose only slightly.

But economists found plenty to worry about. Even excluding the volatile food and energy components of the price index, prices rose at a troubling 5.3% annual rate in April, said Allen Sinai, chief economist for the Boston Co.

“A lot of prices are rising at a fairly good clip,” Sinai said. “It’s hard for me to believe that inflation of more than 5% is acceptable to Washington.”

The April inflation report also included some encouraging signs. David Wyss of Data Resources Inc. in Lexington, Mass., and Stacy Kottman, price specialist at the economic forecasting unit at Georgia State University, were mildly encouraged that the cost of services rose only 0.3% in April after two consecutive months of 0.4% increases.

And some economists expressed satisfaction that a big part of April’s inflation rate resulted from the second straight monthly 2% increase in the cost of clothing.

“You have to believe those prices won’t stick,” said Michael Penzer of the Bank of America in San Francisco. “People aren’t going to buy at those prices, and we could see markdowns as early as May or June.”

And Penzer noted that for the first four months of this year inflation is running at an annual rate of 4.5%, barely more than the 4.4% recorded for all of last year.

“There are so many analysts looking under every rock for higher inflation, and there are a lot of nervous Nellies out there,” Penzer said. “Inflation is picking up, but we’re a long way from the 10% to 13% of the late 1970s.”

Indeed, the 4.5% annual inflation rate for the first four months of this year is substantially lower than the 6.1% annual rate that was recorded during the corresponding four months of 1987.

But last year the inflationary spurt at the beginning of the year was entirely due to a large jump in energy prices. This year, the higher prices extend over a far broader variety of goods and services. Hence, most economists expect the consumer price index to rise about 5% this year and between 5% and 6% next year.

“Any inflation step-up from any source, such as higher wage inflation, could move us to the 6% to 7% range,” Sinai said, “and that surely is intolerable.”

Rise in Clothing Costs

The Labor Department reported that fully one-fourth of April’s consumer price index increase stemmed from the 2% increase in clothing prices.

The cost of women’s and girls’ clothing jumped 3.5% after a 3.9% increase in March--sure signs, economists said, that the inflationary effect of the weaker dollar is hitting home in the form of higher prices for imports.

Food prices for the month jumped 0.6%, another unexpectedly high increase after a 0.4% upward move in March and a 0.2% decline in February.

The 0.8% increase in energy prices was expected, after two consecutive monthly increases in the wholesale prices of oil and gasoline. During April, retail gasoline prices alone jumped 1.1%.

Before seasonal adjustment, consumer prices in the Los Angeles-Long Beach-Anaheim metropolitan area increased 0.4%, compared with a 0.5% unadjusted increase nationwide.

The unadjusted consumer price index rose by 0.6 points to 117.1 in April, from a base of 100 calculated from price levels prevailing from 1982 to 1984.

The index was recently revised from an earlier model in which 1967 was the base year. By that measure, last month’s CPI was 350.8, meaning that a selected cross section of consumer goods and services costing $100 in 1967 now costs $350.80.