Consumer Prices Up Modest .2% for Sept. : Economy: Clothes prices rise sharply, but energy costs fall for the fourth consecutive month.

Consumer prices in September rose an unexpectedly modest 0.2%, with most prices virtually unchanged except for a sharp rise in clothing costs, the government said today.

Energy prices, which had climbed sharply at the wholesale level, raising the expectation of an increase on the retail level, fell for the fourth consecutive month in September, the Labor Department said.

Jittery stock and bond markets rallied on the news, taking the favorable inflation number as a sign the Federal Reserve Board has leeway to nudge interest rates lower.

Also, the report triggered an announcement that the nation’s 38.9 million Social Security recipients will get a 4.7% benefit increase in January to offset the effects of inflation over the last year. (Story, P1)

Meanwhile, in a separate report, the department said Americans’ average weekly earnings, after adjusting for inflation, rose 0.3% in September following a 0.7% decline in August.

Average weekly earnings in September were $338.67, up 3.5% from a year earlier. But, when inflation is taken into account, real weekly earnings were down.

Consumer prices rose at a high annual rate of 6.7% for the first five months of the year, driven up by rising gasoline prices.

However, the index has risen only 0.2% or remained flat in each of the last four months, bringing the annual rate down to 4.4% for the first three quarters, the same as the rate for all of 1988 and 1987.

“This shows clearly that inflation is under control. . . . Under these circumstances, there is no question that interest rates will fall,” said economist William K. MacReynolds of the U.S. Chamber of Commerce.

But economist Robert Dederick of Northern Trust Co. in Chicago said the September report overstates the decline in inflation and warned of higher energy prices ahead.

“There has been an abatement, but it hasn’t been to the degree this number would suggest. We’re likely to have some less attractive numbers in the fourth quarter,” he said.

Gasoline prices, down 2.2% in September, have declined 9.3% in the last four months after increasing 21.2% in the first five months of the year.

Food prices, which were surging earlier in the year, rose a moderate 0.2% last month, in part because of a 1.1% decline for fruits and vegetables.

Clothing prices, after falling in the three previous months, rose 1.7% in September. Apparel for women and girls, reflecting the introduction of new fall and winter fashions, were up 3.6%.