Consumer Prices Post Moderate Rise : 0.4% Increase in February Helps Calm Inflation Fears in Financial Markets

Consumer prices, despite a huge jump in gasoline costs, rose a moderate 0.4% in February, the government said today in a report that helped calm inflation fears that had gripped financial markets.

The boost in the Labor Department’s consumer price index followed a 0.6% January increase that had been the largest monthly advance in two years.

Despite the moderation in February, consumer prices in the last two months have risen at a compound annual rate of 6.1%, sharply higher than the 4.4% increase turned in for both 1987 and 1988.

That acceleration has economists worried that inflation, which has been tamed for the last seven years, is starting to get out of control again.

Financial markets, however, took today’s report on consumer prices more calmly than they did last Friday after the government reported that inflation at the wholesale level shot up 1% in February.

Some economists said the report on consumer prices showed that while inflation will be higher this year, the country is not in danger of entering another inflationary spiral.

‘Premature’ Fears

“There is evidence that the jump in food prices resulting from last year’s drought is now tapering off and energy prices are unlikely to go higher,” said Jerry Jasinowski, chief economist for the National Assn. of Manufacturers. “Fears of inflation accelerating out of control appear to be premature.”

Glenn Forman, an economist for the WEFA Group, an economic consulting firm, said retail prices will be climbing higher in coming months as the increases at the wholesale level flow through to consumers.

“Inflation has ratcheted up a notch, but it hasn’t moved into the inflationary spiral that a number of people were concerned about,” Forman said.

The consumer price increase last month was held back by a better performance for food costs, which advanced 0.5% in February, down from a 0.7% gain a month earlier.

However, gasoline costs shot up 1.7% last month, the biggest increase since a 1.8% rise last August.

Oil Prices

Economists were braced for even sharper price advances in coming months as the effects of recent rises in world oil prices filter through to motorists. Crude oil prices, reflecting the success of petroleum producers to restrain output, have risen to a 17-month high of $20 a barrel.

The slight moderation in food costs reflected price declines for poultry, fish and eggs and smaller increases than in January for beef and pork prices.

Beef prices rose 0.5%, following a 1.2% January increase, while pork prices rose 0.4%, after also being up 1.2% in January.

Labor Department price economist Patrick Jackman said meat prices will probably continue to rise for several more months, reflecting the herd reductions that occurred last summer during the severe drought.

Increases Not Expected

But Jackman said the drought’s impact on other food costs has already passed through to consumers, with further increases not expected.

Also helping to hold back consumer prices in February was a 0.2% dip in clothing costs, as a 0.7% drop for men’s apparel offset a 0.9% jump for women’s garments and a 2.8% increase in infants’ clothes.