Led by a record 20.9 per cent climb in fresh vegetable prices, consumer prices rose 1 per cent in February, the fastest one-month increase since September, 1974, when double-digit inflation gripped the economy, the government said yesterday.
Overall, food prices soared 2 per cent last month, with nearly all the increase due to the extremely cold weather that damaged crops and hindered transportation.
White House press secretary Jody Powell said the big price rise - the February increase represents a compounded annual rate of 12.7 per cent - does not present "a longe-range problem" and is not the start of a trend toward worse inflation.
Consumer prices rose 0.8 per cent in January because of an acceleration in food prices and the cost of services. In 1976, consumer prices rose only 4.8 per cent. For the last three months they have been rising at a 9.1 per cent clip.
Even after food and fuel prices - which also continued to rise - are factored out, consumer prices still rose 0.6 per cent in February, "compared with 0.4 per cent in January and an average monthly increase of 0.5 per cent in 1976," the Labor Department said.
Julius Shiskin, commissioner of labor statistics, said it is too early to tell whether the acceleration of non-food prices is also weather-related or if it is "the beginning of a new, higher rate of increase" for consumer prices. The consumer price rise was foresahdowed by a 2.2 per cent jump in wholesale farm prices in February.
Government economists and many private economists say the underlying inflation rate in the economy is between 5 and 6 per cent. Administration officials, such as Office of Management and Budget Director Bert Lance, have criticized those who argue that President Carter's economic policies - such as the tax cut and spending increase package to pump up the economy - will worsen inflation.
Lance has said that the administration is concerned about inflation and tailored its stimulus program to avoid contributing to further price rises. Business executives who continue to wring their hands about inflation may create a self-fulfilling prophecy, Lance warns.
While the impact of the severe cold and fuel shortages is showing up in higher prices, neither unemployment nor production suffered as much as some economists and members of Congress thought it would.
Already, industrial production has regained all the ground it lost in January and early February and the unemployment rate rose only slightly in February - from 7.3 per cent to 7.5 per cent - while the number of persons finding jobs climbed significantly last month.
The Labor Department said yesterday that while "supplies of many vegetables and citrus fruits were curtailed by adverse winter weather," there were also big price increases for coffee, poultry, eggs, sugar and sweets.
The department said that fresh vegetable price increases accounted for half the total 2 percent rise in food prices and for about a quarter of the overall increase in the consumer price index.
Higher prices for fuel oil, gasoline and natural gas accounted for about 7 per cent of the increase. Fuel oil and coal rose 2 per cent in February, as fast as in January. Gaas and electricity prices rose 0.3 per cent, after rising 0.9 per cent in January and 2.3 per cent in December.
Used car prices continued to soar, increasing 3.3 per cent in February after a 3.8 per cent January gain. This kind said the increase in used car prices may be a reflection of high new car prices, which boost demand for older automobiles.
Because of a sharp rise in auto insurance rates transportation costs rose 0.9 per cent, but overall services rose 0.6 per cent in February after rising 0.9 per cent in January.