Wholesale Prices in May Up .5%; Higher Food Costs Blamed

Wholesale prices, led by the steepest increase in food costs since January, rose a moderate 0.5% in May, the government said today.

If the May increase held steady for 12 straight months, inflation at the wholesale level would be 5.8%, nearly triple the modest 2% increase of the last 12 months, the Labor Department said.

The May increase differed little from the 0.4% rise in April and a 0.6% hike in March, except for the fact that food replaced energy as the main propellant of inflation.

At the White House, spokesman Marlin Fitzwater said, “Inflation remains low and under control.”

Drought, Wages Cited

Sandra Shaber, an economist for the Futures Group, a Washington consulting firm, said the drought and two straight months of hourly wage increases outpacing price gains had stirred some fears of inflation.

“Over the years, wages are still behind inflation; there had to be some catch-up,” she said. “Most people are expecting to see consumer prices rising at about a 5% rate over the second half of the year, giving us 4% for the whole year. That doesn’t alarm me.”

Egg prices jumped 12.5%, mostly offsetting a 16% decline in April. Poultry prices were up 8.2%, pork was up 5.5% and vegetable prices rose 3.3%.

However, wholesale prices for fruit declined nearly 0.9%, and rice was down 3.2%, limiting the overall average increase for food to 0.9%. That was the biggest increase since 1.7% in January.

Energy prices, which had surged 3.1% in April, rose only 0.2% in May, largely because of a 3.8% drop in natural gas prices.

Heating Oil Up 0.7%

Home heating oil rose a modest 0.7%. Gasoline prices jumped 3.8% last month but were still only 1.5% higher than a year ago.

The Labor Department’s index for wholesale prices at the finished goods level minus energy and food was up 0.3%. Analysts consider this a more reliable indicator of underlying inflation because of the month-to-month volatility of food and energy costs.

Over the last year, wholesale prices excluding food and energy have risen 2.8%.

Increases or decreases in retail prices usually lag behind movements in wholesale prices.

“The report indicates inflation is moderate,” said Lawrence Chimerine, chairman of the WEFA Group forecasting firm in Bala Cynwyd, Pa. “We’re not off to the races on inflation.”

Leading the May increase were higher prices of 1.3% for soaps and detergent, 0.8% for women’s clothing, 3% for tires, and 0.7% for prescription drugs.

Car prices rose a modest 0.2% in May after declining 1% in April on manufacturers’ rebates to dealers. Higher prices were also recorded for cosmetics, household flatware and home electronic equipment, all of which had declined in April.

Cost of Children’s Clothes

Children’s clothing prices dropped 1.3% after rising slightly more than half a percent in April. The only other product that had a price drop was alcoholic beverages, down 0.4%.

The May increase brought the overall wholesale price index for finished goods to 107.5, meaning that a basket of products costing $100 in 1982 would cost $107.50 last month, up 60 cents from April.

So far this year, wholesale prices are rising slower than consumer prices. For the first five months of 1988, wholesale costs are up 3.4%. Consumer prices through April are up 4.5%.