Energy Prices Up; Drought Effects Ease

Wholesale prices rose a brisk 0.6% in August as energy prices rose at their steepest clip since April but food costs posted only moderate gains, the government said today.

If the August increase held for 12 straight months, inflation at the wholesale level would amount to 6.9%, more than triple the 2.2% 1987 price rise.

Food prices one step short of the retail level were up a moderate 0.4%, the same as in July and another indication that the effects of the drought are moderating after steep rises in May and June.

Energy prices rose a sharp 2.2% with gasoline costs up 3.8%. Natural gas prices rose 3.6% as heating oil costs fell 0.2%.

Analyst Donald Ratajczak of Georgia State University said a shortage of unleaded gasoline at the peak of the summer vacation season contributed to the energy price rise.

“We’ve had a very strong driving season and heavy demand for gasoline. . . . We expect that to fall off as soon as the driving season ends, which traditionally is after Labor Day,” he said.

Gas Prices Could Rise

However, he warned that natural gas prices will continue rising as the weather turns colder.

Analysts, however, expect energy prices to level off as crude oil prices have recently fallen, anticipating production increases resulting from the cease-fire between Iran and Iraq.

Although the overall August price rise was the steepest gain since an identical 0.6% leap in March, there were some optimistic signs in August’s report.

Passenger car prices, which had risen steeply early in the summer, were up a moderate 0.3% last month.

Clothing costs, after soaring earlier in the year, were down 0.4% for men and boys and up a slight 0.1% for women and children.

Among food costs, a sharp 12.6% rise for eggs and a 9.6% gain for vegetables were offset by a 6.4% drop in fruit prices and by declines for rice, chicken and beef.

Fruit Prices Drop

Ratajczak said fruit prices dropped because trees stressed by the summer heat had produced their fruit early.

As for meats, the 0.6% dip in beef prices was more moderate than the 2.5% July decline as pastures began to recover from the drought and farmers sent fewer animals to slaughter.