4% Inflation Rate Reported for 1984 : Three-Year Record Is Best Since 1968; Price Hikes Expected to Remain Small

Consumer prices rose 0.2% in December, a minuscule increase that gave the nation’s economy a 4% inflation rate for all of 1984 and the best three-year inflation rate since the late 1960s, the Labor Department reported Wednesday.

The 1984 increase was slightly higher than the 3.9% and 3.8% advances in consumer prices recorded during 1983 and 1982. But it occurred in a year of rapid economic expansion--at 6.8% growth, the strongest performance since 1951--a combination that adds up to unusually good economic news.

White House spokesman Larry Speakes declared in a statement that, “like the weather, inflation is frozen.” He forecast continued low inflation coupled with further economic growth. Private economists, on balance, agreed.

“We have had an extraordinary year for low inflation,” Allen Sinai, chief economist for Shearson Lehman/American Express, said. “The main causes were the strong dollar, the economic slowdown in the second half of 1984 and ongoing downward movement in energy prices.”

L.A. Prices Up 4.5% The Labor Department reported also that consumer prices in the Los Angeles-Long Beach-Anaheim metropolitan area dropped 0.2% in December but increased 4.5% for all of 1984.

For the three years ending last month, consumer prices rose an aggregate of 12.1%, according to the department’s Bureau of Labor Statistics. It was the lowest three-year inflation record since 1966-68, when prices rose 11.5%. By comparison, consumer prices jumped 13.3% in 1979 and 12.4% in 1980 alone.

In its report, the department pointed out that the sharp drop in inflation--largely attributable three years ago to falling energy prices--has spread to virtually every category measured to determine the consumer price index.

Likewise, private economists noted that prices for housing, transportation, food and apparel all increased slowly last year. Even the cost of medical care, up 6.1% during all of 1984, increased more moderately than in previous years.

Thanks to slow expansion in mid-1984, Sinai noted, industrial capacity is ample enough and unemployment, at 7.2%, is high enough to provide sufficient room for growth without sparking a new round of inflation. “There is no reason to expect the (consumer price index) to accelerate,” he said.

Weakening Energy Prices He noted that energy prices, especially those of crude oil and gasoline, are likely to continue to weaken because of the inability of the once-dominant OPEC nations to dictate prices. And he predicted that housing prices would remain stable, observing: “Housing now seems to be considered mainly a shelter, not a vehicle for getting rich.”

Robert Gough, vice president of Data Resources Inc. of Lexington, Mass., generally agreed. “The low inflation covered all components--energy, housing, food, transportation. In any of them, inflation is no longer a problem,” he said. “That should continue. The outlook for 1985 is very good. We forecast (consumer price index) increases of 3 1/2% to 3 3/4% for 1985.”

Gough noted also that the dollar’s persistent strength against other currencies and the resulting flood of imported goods have kept downward pressure on prices of virtually all domestic products facing foreign competition. In addition, he said, “Wages should also be moderate through 1985. We still have 7% unemployment, and there is an available pool of workers.”

Donald Ratajczak, head of the economic forecasting unit at Georgia State University, noted, “The world trend in inflation is downward, and our trend is even stronger because of the (strength of the) dollar. We don’t really see any significant price increases in any of the categories.”

Although widely welcomed, Wednesday’s report was no surprise. The Commerce Department, in its report Tuesday on the strong growth of the gross national product, recorded overall 1984 inflation in the economy at 3.7%--the best record for that index since 1967.

And two weeks ago, the Labor Department reported that wholesale producer prices rose only 1.8% in 1984, a measure that gave the economy its lowest two-year stretch of wholesale price increases since the early 1960s.