Consumer Price Hikes Offer Hint of Inflation : Economy: Nationally, costs rose a moderate 0.3%, but the Southland saw prices jump 0.5% last month.

Consumer prices rose a moderate 0.3% in February, the Labor Department said Wednesday, suggesting that inflation is caged but not tamed.

In five Southern California counties the consumer price index jumped 0.5%, paced by a steep climb in medical costs and a boost in housing costs, the government said. Medical costs rose 1.7%, the largest one-month gain since the 2.2% reported in January, 1988. Housing costs rose 0.6%, with increases for both homeowners and renters.

Along with the modest inflation rate for the nation as a whole came a sign that the economy is heating up. The Federal Reserve said industrial production registered the largest gain in nearly a year and a half in February.

The reports seemed to indicate a reviving industrial sector that may soon pass along price increases. But on Capitol Hill, Federal Reserve Board Chairman Alan Greenspan said he was not overly concerned about the price reports because he did not see inflationary pressures arising from labor costs.

Analysts also took the view that the increase in factory activity did not necessarily presage inflation because unemployment is still high. “There is no sign of inflationary pressures in industrial production data,” said Edward Yardeni of C.J. Lawrence & Co.

At the same time, few believe that price declines lie ahead. “The best news on inflation is over,” said Allen Sinai of the Boston Co. Economic Advisers. “A permanent and significant re-acceleration of inflation is unlikely.”

But Wednesday’s news temporarily rattled financial markets, initially slicing more than half a point off the bellwether 30-year Treasury bond.

The government said the increase in the consumer price index included a slight rise in food prices and a decline in energy costs. The CPI had risen an unexpected 0.5% in January.

In southern California clothing prices were also up, but these costs are subject to seasonal adjustments. Lower costs were reported for entertainment and food.

Fed Chairman Greenspan pointed out that the inflation figures for January and February aren’t as good as they were at the same time last year. “We are getting off to a less than auspicious start,” he said.

But while raw material prices are higher, he noted, that’s a consequence of a better economy and is to be expected. “While we must clearly remain vigilant,” he said, “my inclination is to view the latest data as aberrations.”

The increased factory output reinforced signs that the industrial sector is reviving and may soon be in a position to expand production, hire more workers and raise prices for customers.

The Fed said industrial output picked up 0.4% last month after a revised 0.5% January increase, continuing a string of gains that began last October.

“This points to a recovery that is now on solid ground, and the chances of a fallback into recession are much lower than they were any time in the past two years,” said economist Lynn Reaser of First Interstate Bancorp in Los Angeles.

Consumer Price Index

Percent change from prior month, seasonally adjusted

Feb., ‘93: +0.3%

Jan., ‘93: +0.5%

Feb., ‘92: +0.2%

Source: Labor Department