Price increases in the Washington area were less than half the national average in June and July as a result of lower food and clothing costs and comparatively small increases in the cost of housing and transportation, the Labor Department reported yesterday.

The Department's Bureau of Labor Statistics reported that for the two-month period of June and July, the Consumer Price Index for the metropolitan area rose 0.9 percent, an annual rate of 5.6 percent. For the same period, the national CPI grew at the equivalent of 12.7 percent annually. For the month of July alone, the national increase was 1.2 percent, or 15.2 percent annually.

The price war between local grocery stores was apparently a key element in the relatively low rate of increase in the Washington area index. The same intense competition, called "warehouse pricing," has been taking place in the Baltimore area, which showed a similar low rate of increase in the consumer price index. At an annual rate, the CPI in Baltimore grew 7.3 percent.

According to the Labor Department, the cost of groceries fell 0.2 percent in the Washington area, compared to a national increase of 1 1/2 percent in the same period. The latest figures reflect a steady decline in grocery prices: In May, they fell by 2.4 percent, and in April the decline was 2.7 percent. The major participants in the price war are Giant Foods Inc. and Safeway Stores Co. However, they admitted late tonight that they have begun to raise prices again to offset Giant's first losses in a decade and Safeway's depressed profits.

In the detailed breakdown of food prices in the Labor Department report, however, there were indications that the effects of the price war may be leveling out, with June grocery prices falling by 0.4 percent, but July prices rising slightly, by 0.3 percent.

The total cost of food in the area increased during the two-month period by 0.4 percent, largely because the cost of eating out rose by 1.5 percent.

The largest drops in area food prices were for fish and other seafoods, dairy products, coffee, sugar and soft drinks. These declines more than offset rising prices for beef, poultry, fresh fruit and processed vegetables, according to the Labor Department.

The three other areas of prices showing significantly smaller increases, or larger declines, for Washington consumers compared to the national figures were housing, clothing and transportation.

While the national cost of housing increased by 2.9 percent in June and July, in the Washington area the increase was less than half that rate, 1.4 percent. Electricity fees and mortgage costs rose, while natural gas, fuel oil and telephone charges fell.

The cost of transportation increased at a 1.7 percent nationally for the two-month period, just over twice the Washington area increase of 0.8 percent. Gasoline prices fell, while the cost of used cars rose, along with automobile insurance and financing charges.