Stocks down sharply, inflation up modestly Feb. inflation index rises 0.2 percent


WASHINGTON -- In the second recent dose of surprisingly high inflation figures, the Labor Department reported yesterday that the Consumer Price Index rose 0.2 percent in February but added that when price gyrations in energy and food are eliminated there was a jump of 0.7 percent.

This surge in so-called "core inflation" at the retail level, which followed Friday's report of a substantial increase in prices paid to producers, dismayed economists and drove interest rates up again. It also contributed to a big drop in the stock market, where the Dow Jones industrial average tumbled 62.13 points, the biggest loss in five months.

Many analysts and market participants have concluded that the Federal Reserve is now likely to be worried enough about inflation to defer for perhaps weeks further steps to fight the recession through an easier monetary policy.

Analysts generally disregarded the favorable overall consumer index figure yesterday because it included a 4 percent drop in energy that resulted mainly from allied successes in the Persian Gulf war after a sharp price run-up.

Business downturns are generally expected to curb inflation, but analysts find little evidence of this now, with overall consumer prices rising at the same 5.4 percent pace during the six months that ended in February and the six months that ended last August.

"There seems to be very little progress" against inflation in this recession, said Brian M. Jones, an economist at Salomon Brothers. He added that the Federal would almost certainly not take additional action to spur the economy until March job data are published April 5.

Perhaps further encouraging the Fed to wait was a Commerce Department report yesterday showing that housing starts rebounded last month to a rate of 989,000 a year, a pace 16.4 percent above the severely depressed January level. Permits issued for future construction jumped 9 percent.

Last week, the government said that while prices paid to U.S. producers fell 0.6 percent last month, the rate excluding food and energy rosean unsettling 0.4 percent.

In Baltimore, grocery prices fell 0.5 percent last month, the U.S. -- Bureau of Labor Statistics reported. Area grocery prices had been up 1.1 the month before.

The bureau said a basket of groceries that would have cost $10 in 1982 would cost $13.80 today.

Alan M. Paisner, the bureau's regional commissioner, said that less expensive meats, poultry, fish and eggs contributed most to the overalldrop in retail food prices. In the last year, the cost of food for Marylanders has risen 2.1 percent.

Prices at local butcher counters fell sharply for the second consecutive month, the survey found. The 2.5 percent drop marked the largest one-month decline in that category in four years.

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