Living Costs Decline for 3rd Month : Lower Oil Prices Help Mark Biggest Savings in 36 Years

Cheaper gasoline helped drive down the cost of living by 0.3% during April, the third straight month of declining prices, marking the biggest savings for shoppers in 36 years, the Labor Department reported Wednesday.

In the Los Angeles-Long Beach-Anaheim metropolitan area, where gasoline is a bigger share of spending, the cost of living fell 0.4%.

However, because oil prices have begun rising in the last few weeks, economists believe that a modest degree of inflation is returning.

Sharpest Dip Since 1948

The collapse in the price of oil has been more than sufficient to overcome the impact of slightly higher expenses for food and clothing. National prices fell at an annual rate of 4.3% during the last three months, the sharpest plunge since the period from November, 1948, through January, 1949, when prices dipped at a rate of 4.7%.

American workers are enjoying “a lot more money in their pockets to spend on less expensive goods and services,” White House spokesman Larry Speakes said, referring to the welcome inflation news and a report that average individual earnings rose for the third straight month.

Prices rose by 3.8% last year. This year, an inflation rate of about 3% is expected as oil prices move up somewhat and the weaker U.S. dollar makes imports more costly for American consumers.

“This is it--the party’s over,” said economist Dorothea Otte of Georgia State University, who expects increased summer driving to help push up gasoline prices. “We’re going to start returning to normal levels of inflation,” she said.

‘End of the Line’

The plunge in prices has reached “the end of the line,” said Irwin Kellner, chief economist at Manufacturers Hanover Bank. “If you look beneath the surface, you see most items are going up,” he said.

Fruit and vegetable costs rose sharply in April, helping push up food prices by 0.3%. Housing expenses climbed 0.3%, and clothing cost an additional 0.2%.

But such increases were swamped by the impact of falling energy prices, which plunged 5.8% during April. The biggest savings came from gasoline costs, which have dropped to 1979 levels.

The government calculates inflation through its consumer price index, which measures the change in prices for goods and services purchased by a typical urban resident. Gasoline accounts for 5% of all consumer spending.

Because the gasoline price drop has been so great--about 11.3% during April and 26% in three months--these savings are greater than the small increases in prices for other goods. Thus, the total cost of the hypothetical urban consumer’s “market basket” has shrunk.

The impact on individuals obviously depends on their buying patterns.

A heavy gasoline user, for example, will be very conscious of having saved money. On the other hand, a person who does not drive, has recent medical bills and rented an apartment last month may be complaining vociferously about inflation. Renters’ costs rose 1.1%, and medical expenses climbed 0.6%.

The drop of 0.3% in consumer prices during April followed declines of 0.4% each month for both March and February.

Oil Prices Rebound

But “the situation is going to turn around” because oil prices have begun to rebound, said Patrick Jackman of the Labor Department. “While we’re not going to see runaway inflation, we’re definitely going to see some positive numbers,” he said.

The index measuring consumer costs stood at 325.3 last month, signifying that a combination of goods and services priced at $100 in 1967 cost $325.30 during April.

Because prices fell last month, purchasing power increased during April, rising for the third consecutive month, the Labor Department said. Average weekly earnings totaled $304.15 in April, up from $298.05 a year before. The average hourly rate of pay climbed to $8.74, up from $8.54 last year.

In a separate report, the Commerce Department said total personal income, a broader measurement including government payments as well as wages and salaries, rose 1.2% during April, an unusually large increase for a single month. The large increase was caused mainly by subsidy payments to farmers, the department said.

Staff writer Oswald Johnston contributed to this story.