Wholesale prices, which are precursors of prices consumers must pay, rose sharply last month as the cold weather damaged crops and interfered with transportation.
The Labor Department reported that wholesale prices jumped 0.9 per cent in February, or at a compound annual rate of 11.4 per cent, mainly because of a 2.2 per cent increase in farm products.
Last year wholesale prices rose 4.7 per cent and consumer prices increased 4.8 per cent.
The February increase was the biggest one-month rise in wholesale prices since the 1.2 per cent advance in October, 1975.
Wholesale prices are prices businesses pay one another for goods that they process further. Sometimes changes in wholesale prices show up quickly in retail prices - such as changes in fruits and vegetables and meats - and other times the relationship between wholesale and retail prices is much less clear.
Since much of the February increase was accounted for by fresh fruit and vegetable price rises, much of last month's wholesale price increases should be appearing now at the reatail level.
White House press secretary Jody Powell said administration experts and many other economists believe that the surge in February wholesale prices was "primarily the result of the cold weather" and is not an indication of a change in the underlying inflation rate.
Carter administration economists say that while the rate of inflation may vary from month to month, the underlying trend is in the range of 5 to 6 per cent. That is higher than in most years since World War II but is a substantial improvement from the levels experienced during the mid-1970s.
John Laying, the top price analyst for the Bureau of Labor Statistics, said that the February report brings "mixed news."
Foods rose sharply and will continue going up for a while, Laying noted. "Not all of the food price increases are due to the weather," he said. He pointed to cotton and coffee price increases as well as rises in canned fruits and vegetables, which should not be affected by the U.S. freeze.
Coffee prices have been rising because of damage to the Brazilian coffee trees in 1975 which reduced the crops last year and will keep harvests low in the near future.
Laying said that prices of processed fruits and vegetables could be moving up in anticipation of higher prices for fruits and vegetables that will be packed from current crops. Vegetables accounted for 17 per cent of the total wholesale price rise. Despite the public worry about fruits, Laying said that only 4 per cent of the increase was due to fruits.
Fuel and power prices surged 3.3 per cent, mainly because of continuation increases in antural gas prices. Laying said if fuel prices are factored out, industrial prices did not rise as fast as in January.
Economists tent to look at industrial price changes - such as fuels, machinery and metals - more carefully than farm price changes because industrial prices change less frequently and are more likely to becomes a permanent part of the price level.
Robert Crandall, acting director of the White House's Council on Wage and Price Stability, noted that industrial prices have been rising at about 0.6 per cent a month for the last six to nine months.
He said because there is much excess capacity in America industry, there is unlikely to be a surge in inflation.
Administration officials have been sensitive to charges that the Carter stimulus package - which combines tax cuts and spending increases totalling $15.7 billion this year - will worsen inflation.
At a meeting with reporters yesterday, Bert Lance, director of the Office and Management and Budget, said that the business community should have no fears that the administration's policies will worsen inflation.
The wholesale price index in February stood at 190 per cent of its 1967 average. That means a selection of goods that cost $100 in 1967 cost $190 last month.
All percentage changes are adjusted by the Labor Department to account for normal seasonal price changes, but the index itself is not.