Inflation at Wholesale Level Jumps

Wholesale price inflation jumped ahead to an annual rate of 5.7% in July, ominously propelled not so much by volatile food prices as by big boosts over a wide range of products, including clothing, automobiles and furniture, the government said today.

The increase came despite lower prices for beef, as the drought prompted farmers to slaughter more animals because of burned-out pastures and higher feed prices.

Just three days after the Federal Reserve Board initiated an increase in interest rates to fight inflation, the Labor Department said wholesale prices rose 0.5% in July, the same monthly increases as in May and March.

Producer Prices Rise

In June, the department’s producer price index for finished goods rose 0.4%, or at an annual rate of 4.6%, more than double the 2.2% rate of wholesale price inflation for all of 1987.

Wholesale prices for consumer foods increased at a slower pace in July--0.4%--than for goods overall, indicating to some analysts that the worst immediate effects of the drought plaguing the farm belt were over. Food prices had been rising faster than prices for other products on the wholesale level since April.

Overall energy prices, meanwhile, remained unchanged after a 1.6% drop in June, with a 3% seasonally adjusted increase in gasoline prices offsetting a 6.1% decline in what distributors pay for home heating oil.

Other Prices Up

Excluding food and energy, wholesale prices rose at a 0.6% rate in July. Because food and energy prices are highly volatile from month to month, most analysts look to price changes for other products as a better indication of inflation.

Analysts said the softer food prices partly offset what they called an over-reaction in June to the drought.

“As expected, higher feed prices and burned-out pastures have sharply increased market slaughters and begun to influence meat prices,” said Donald Ratajczak, director of economic forecasting at Georgia State University. In addition, Ratajczak said, fruit trees under stress from the unusually hot weather are throwing off their fruit early “resulting in a temporary early supply of fruit.”