Consumer Prices Post Slight Rise in October : 1986 Cars, Sharp Upturn in Meat and Fuel Costs, Higher Liquor Tax Spur 0.3% Advance

Consumer prices advanced 0.3% during October, based on higher costs for newly introduced 1986 model cars, sharp upturns in meat and fuel oil costs and a higher liquor tax, the Labor Department reported Friday.

A leading private price analyst said consumers can expect grocery and energy bills to be slightly higher this month.

The modest October gain in the consumer price index was the largest since April, when prices rose 0.4%. In each month from May to September, prices rose only 0.2%.

The increase brought inflation for the first 10 months of the year to 3.3% when figured on an annual basis. If that rate holds for the rest of the year, 1985 would have the lowest rate of inflation since 1967’s 3%, said Labor Department analyst Patrick Jackman. Last year, inflation for consumer prices was 4%.

In a separate report, the Labor Department said real average weekly earnings for blue-collar workers fell 0.6% in October, due to the increase in the consumer price index and a 0.3% drop in average weekly hours. For non-supervisory workers in private industry, average weekly wages were $302.75 in October, $2.43 less than in September.

Real earnings, calculated by adjusting current-dollar earnings for changes in the price index, rose 0.3% in September and 0.5% in August.

The Reagan Administration discounted the small rise in consumer prices, White House spokesman Larry Speakes saying, “The economy in general continues to perform with impressive vigor.”

Foods and beverages climbed 0.4% during October--the highest since February’s 0.5% rise--although Jackman said most of that increase was due to a higher federal excise tax on distilled spirits that took effect on Oct. 1, pushing liquor costs 3% higher during the month.

Food Prices

He said that, excluding liquor, food prices at the grocery rose only 0.2%, below September’s 0.3% increase. Food prices declined in April and May and rose only 0.1% in each month from June to August.

Dairy products, cereals and bakery products declined in price, while fruits and vegetables, meats, poultry, fish and eggs rose. Prices for beef and veal rose sharply for the second straight month--up 2.1%. Pork prices fell.

Transportation costs climbed 0.2%, the first increase since April. The rise reflected higher prices for the newly introduced 1986 model cars, as well as steeper financing and insurance costs on the new models. Transportation costs were depressed in recent months as car dealers offered discount financing and incentives to clear showrooms of 1985 models.

Donald Ratajczak, chief of the economic forecasting project at Georgia State University and one of the nation’s leading price analysts, said dealers reported that less than half of their inventories in October were made up of 1986 models, so the auto price increases also will be registered in November’s price index “as these models become more available.”

Motor Fuel Costs

Offsetting those transportation increases were a 0.5% decline in the cost of used cars (the seventh monthly drop), a 0.8% drop in gasoline prices (the fourth straight monthly decline), and a 0.7% drop in motor fuel costs.

Within the energy category, prices for natural gas dropped 1.9% and electricity costs fell 1.4%. However, fuel oil prices jumped 2.4%, the second monthly sharp upturn.

“The temporary shortage of fuel oil definitely is creating price pressures, which should push oil up again next month,” Ratajczak said.

Prices at the wholesale level climbed 0.9% in October, fueled by sharply higher prices for food, and especially meats. Price increases at the wholesale level usually will translate into sharper prices consumers pay at the retail level months later.

Upturn in Meat Prices

Ratajczak said his most recent survey of November prices at the wholesale level shows more of an upturn in prices, particularly meats.

He said if wholesale prices move upward for only a month, retailers often won’t pass on the higher prices, fearing they will lose customers.

“But if we get higher prices for two months at the wholesale level, you’ll definitely see an increase in the consumer price index,” said Ratajczak. He said he expects that the next month’s price index will rise 0.4% to 0.5%.

Entertainment costs, which covers such items as television sets, stereos and radios, showed a 0.6% incline in October’s prices, which Ratajczak said was the one area in the index where the falling strength of the dollar--and thus the higher price of imported electronics goods--is “definitely starting to hit consumers.”

Also registering increases were clothing, up 0.6%, largely due to rises in women’s and girls’ clothes, and medical care, up 0.5%.