Wholesale Prices Stable as Energy Costs Decline : Economy: The underlying core rate of inflation--which excludes the volatile food and energy components--settled at 3.7%, a slight improvement.

The unexpected surge in energy costs that drove wholesale prices up so dramatically in January reversed itself last month, returning inflation to the relatively moderate pace that prevailed during most of 1989, the government reported Friday.

After soaring 13.6% in January, largely because of a record cold spell that caught fuel suppliers short, energy prices plunged 5% in February as the winter weather thawed and demand eased.

Food prices, which also spurted in January as a result of the freeze, rose more slowly in February.

The bursting of January’s “price bubble” left the Labor Department’s overall wholesale price index unchanged during February--offsetting at least part of a 1.8% rise recorded in the January surge.

Analysts said energy prices most likely would continue declining during March.

The index showed the underlying “core” rate of inflation for the three-month period that ended in February--a more stable measure of inflation that excludes the volatile food and energy components--at an annual rate of 3.7%, a slight improvement from the previous period.

Inflation at the retail level is running a bit higher, at annual rates of 4% to 4.5%.

January’s 1.8% rise was the biggest jump in wholesale prices of any month since the early 1970s. However, analysts shrugged it off at the time, predicting--as it eventually occurred--that the “price bubble” would prove temporary.

Economists were optimistic after Friday’s report. Donald Ratajczak, a Georgia State University economist, said he had “been looking . . . to see if we can find any early warning signals of higher inflation, and it seems we aren’t finding any.”

Friday’s report left the overall producer price index in February at 117.4% of its 1982 base-period--meaning that it took $11.74 to buy the same cross section of goods last month that cost $10 in 1982.

Meanwhile, the Federal Reserve Board reported separately that industrial production rose 0.6% in February, rebounding from a 1% drop in January that had stemmed primarily from layoffs in the auto industry. However, that industry continued to suffer through one of its worst periods in recent years.

Although auto assemblies rose sharply in February, overall output was 10% below its level of a year ago.

Lynn Reaser, economist for First Interstate Bancorp in Los Angeles, said the slowing of wholesale prices of crude materials and intermediate goods reported Friday reflected continued weakness in the industrial sector.

Also Friday, the Commerce Department said housing starts fell 7% in February, in part because the cold weather that swept the country during the month delayed apartment construction in some regions.