Lower Oil Costs Help Hold January Price Rise to 0.3%

Retail prices increased only 0.3% in January, ending a brief three-month flirtation with higher inflation at the end of 1985 and reflecting the first impact of the sharp drop in crude oil prices that began at the end of last year, the government reported Tuesday.

The Bureau of Labor Statistics said that the inflation rate, which had reached as high as 0.6% last November, had reverted to the same average monthly rate of advance that has prevailed since late 1981, when an era of high inflation came to a sudden close.

Lower Inflation Seen

Economists attributed the inflationary burst of late 1985 to one-time increases in food and energy prices. In fact, they expressed surprise that the collapse of world crude oil prices did not have a greater impact in January and predicted lower--even negative--inflation into the spring.

“We expect to see much more of the gasoline decline,” said Dorothea Otte of the economic forecasting project at Georgia State University. She predicted that the consumer price index may decline by as much as 0.4% in February, and, for all of 1986, the forecasting project sees inflation as low as 2.8%, a level unmatched since the late 1960s.

The Bureau of Labor Statistics said that prices for gasoline at the pump actually declined in January, although they recorded a 0.1% increase after seasonal adjustments. That tiny increase compares with a combined 1.3% jump in November and December.

In a separate report, the Labor Department said that retail prices in the Los Angeles-Anaheim-Long Beach area increased a scant 0.2% for the month.

Economists’ Outlook Rosy

The view that the price outlook will remain rosy at least through June was nearly unanimous among economists. They said that the sudden collapse of crude oil prices, which have fallen from about $25 a 42-gallon barrel to $15 on spot markets since Jan. 1, will work its way through virtually every facet of the economy.

“I’ve been going through the report line by line, and it’s all good news,” said Robert Gough of Data Resources Inc. “And I expect it to continue.”

Allen Sinai, chief economist with Shearson Lehman Bros., attributed the slowdown in the inflation rate for food to the fact that the government’s heavy purchases of farm produce late last year had ended, doing away with temporary shortages that had driven prices up for a few months.

“Consumers have much to look forward to into the summer as food inflation slows down and as the very big decline in crude oil works its way through the system,” Sinai said. “But today’s report indicates that the process already has started, with the housing and transport indices already reflecting that impact.”

Used-Car Prices Up

Housing costs increased 0.3%, compared to 0.5% in November and 0.4% in December. Transportation was up 0.5%, primarily because of advances in used-car prices and in public transit fares, which typically rise only once a year in most cities.

Sinai noted also that the expected increases in the cost of imported goods, caused by the rapidly declining value of the dollar, have yet to materialize.