WHOLESALE PRICE SPURT RAISES FEARS

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, March 13, 1993                   TAG: 9303130022
SECTION: BUSINESS                    PAGE: A-6   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium
WHOLESALE PRICE SPURT RAISES FEARS
Prices paid by wholesalers jumped 0.4 percent in February, the worst in more than two years, the government said Friday, rattling financial markets with new worries about inflation.
Analysts were expecting a milder 0.3 percent rise in the Labor Department's Producer Price Index, which measures inflation one step before it reaches consumers. The index is based on prices paid to producers of goods, such as factories and farms.
For the first two months of the year, producer price inflation ran at a 3.4 percent annual rate, more than double the 1.6 percent price rise registered for all of last year.
In February, large seasonally adjusted increases for home heating oil, gasoline, tobacco and new cars more than offset declines in the prices of fruits and vegetables.
The increase was the largest since an identical rise in November 1990, early in the recession. Since then, the slow economy has dampened demand, keeping a lid on prices.
Most analysts think inflation will remain moderate this year, along with economic growth, but some now warn that inflation won't improve as had been expected.
"We're starting to see the first signs of at least some acceleration of inflation from the economic expansion. At best we'll be stable on consumer inflation this year . . . and next year we'll start to accelerate moderately," said economist David Jones of Aubrey G. Lanston & Co., a New York securities dealer.
Economists surveyed by Blue Chip Economic Indicators of Sedona, Ariz., expect consumer inflation of 3.1 percent this year and 3.4 percent next year, up from 2.9 percent last year, the second-lowest in a quarter-century.
Economist Donald Ratajczak of Georgia State University said a moderate spurt of inflation is a natural reaction when solid economic growth resumes following a recession. But it need not continue all year, he said.
"This isn't unusual in the early phases of an economic upturn. When the economy is very weak, people sell some goods at below cost. When the economy improves, the first thing they try to do is push them up to the break-even level. After that, things tend to calm down, and that's what we're hoping will happen."
Economist Robert Brusca of Nikko Securities Co. International Inc. said some prices, particularly for fuel oil, which surged 18.5 percent, were affected by a cold snap that hit most of the country.
"There are some things . . . [in the report] that make you grit your teeth a little bit, but when you put this in the context of current economic conditions, I don't think it's a real problem," he said.
Overall energy prices rose 1.7 percent, the biggest increase in eight months. Gasoline prices rose 2.6 percent. The cost of residential gas and electricity both declined.
Food prices edged down 0.1 percent.
Excluding the volatile food and energy categories, which jump around from month to month, prices rose 0.3 percent following a 0.4 percent increase in January.
New car prices were up 0.6 percent. Prices also rose for cosmetics, appliances, furniture and men's and boys' clothing. Prices dropped on alcoholic beverages, books and luggage.
The various changes left the Producer Price Index for finished goods at 124.3 percent of its 1982 base of 100.

by Archana Subramaniam by CNB