Consumer Prices Up a Steep 0.5% in June : Analysts Call Data Worrisome Sign of Inflation Pressure

Consumer prices, fueled by sharp increases in food and gasoline costs, shot up 0.5% in June, more than double the rate of the last two months, the government said today.

The unexpectedly steep rise in the Labor Department’s consumer price index followed moderate 0.2% increases for both April and May.

Prices in Southern California rose 0.3% last month, the same as in May, putting inflation in the area at 4.9% for the last 12 months.

Through the first six months of the year, consumer prices at the national level have been rising at an annual rate of 5.9%, well above the 4.6% for all of 1989.

Analysts called the June inflation figure a worrisome increase that demonstrates entrenched inflation. They had predicted that prices would rise more moderately at 0.3%, and continue to recover from a jolt early in the year when a cold snap sent the costs of fruits, vegetables and energy skyward.

“This was the time when we were supposed to be getting a good number in response to the surge from the first of the year. But the message is inflation is very much still part of the scene, and there’s no sign that it’s abating,” said Robert Dederick, chief economist at Northern Trust Co. of Chicago.

“There’s still a stranglehold of weak growth . . . and high inflation. These twin problems present a real dilemma for policy-makers,” said Allen Sinai, chief economist at the Boston Co.

In the inflation report, grocery store food prices, which had fallen in each of the last two months, rose 1% in June as prices went up for all of the major food categories, the Labor Department said.

There was a sharp turnaround in the price of fruits and vegetables, which rose 1.5% after falling 2.4% in May.

Fresh fruit prices rose 2.2% after seasonal adjustment, while fresh vegetables, which had increased 29.2% in the first two months of the year and then fallen 23.6% in the next three months, advanced 1.4% in June, the report said.

Pork prices, up 4% in June, have risen sharply over the last nine months, climbing at an annual rate of 26.2% during that period. Poultry prices were up 1.3% while dairy prices, after dropping the last three months, rose 0.2% in June.

Food overall was up 0.7%.

Gasoline prices, which generally increase during the driving season of the summer months, jumped 2.5% last month after falling 1.6% in May.

Energy costs overall were up 0.6%. The price of natural gas shot up 2.7%, but fuel oil dropped 4.2% and electricity fell 1.6%.

Prices for items outside the volatile food and energy sectors jumped 0.4% in June. Analysts consider this so-called “core” rate a better indicator of underlying inflation pressures in the economy.

New-car prices edged down 0.2%, the fifth straight decline in the face of sluggish sales.

Clothing costs, which jumped sharply earlier in the year when a warm February got spring sales off at an early start, fell 0.1% last month.

Medical care costs soared 0.7% in June for the fifth straight month, pushing those costs 9% higher than a year ago.