The economy was hit by another big dose of inflation in February as wholesale prices shot up 1.1 percent, the most in three years, the Labor Department said yesterday.
The news on inflation probably will be bad for several months, yesterday's figures suggested, as big increases in crude-materials prices work their way through the production process.
As in recent months, food prices were the main offender in February; the price of food ready to be shipped to supermarkets rose 2.9 percent. But prices paid for nonfood goods also rose substantially; prices paid by producers for finished goods, such as machinery, went up 0.7 percent. These nonfood prices are regarded by economists as better barometers of true inflation, because they are steadier.
Not only did finished goods soar in February, but price pressures appear to be building among partially processed goods like steel and unprocessed goods like iron ore.
"That's troublesome," said Commissioner of Labor Statistics Julius Shiskin. "We can see infationary pressures building" all along the chain of production. But Shiskin cautioned against predicting a major surge of inflation beyond the 7 percent most economists expect in 1978. He said it is too early to tell, although there is "cause for concern."
G. William Miller, the new chairman of the Federal Reserve Board, said yesterday that inflation has become one of the biggest problems facing the economy and that since the the start of the year, price "developments have been working against us."
Miller said the two biggest problems facing the economy are rising prices and the sagging international value of the dollar.
Two months ago President Carter announced a modest voluntary program aimed at reducing wage demands and price increases. The program has received scant attention as the White House has been preoccupied with other issues.
Most economists think the economy is stuck with an inflation rate between 6 and 7 percent, representing the difference between wage increases, averaging 8 to 9 percent, and increasing output per hour worked, which is about 2 percent.
The February jump in wholesale prices of finished goods follows a 0.6 percent rise in January. Good prices increased 1.1 percent in January.
Retail food prices, those paid by consumers, are closely related to the finished foods category of the wholesale price index. It was rising good prices that triggered a 0.8 percent rise in the consumer price index for January, about twice the pace of the previous six months.
Overall consumer finished goods rose 1.3 percent, but when food is factored out, the increase was a modest 0.3 percent. The Labor Department said that cold weather was a factor in the surge in food prices.
Food prices rose at all levels of production: crude (wheat), intermediate (flour) and finished (bread). At the near-supermarket level, the department cited big increases for pork, eggs, beef, veal and dairy products. Among nonfood consumer goods, the department cited decreases in gasoline and home heating oil prices.
All price changes are adjusted to account for regular seasonal variations.