‘86 Inflation May Be Least in 22 Years : November Increase in Car, Food Costs Offset by Drop in Oil Prices

Consumer prices rose a modest 0.3% in November, with increases in food and automobile costs offsetting slightly lower energy prices, the government reported today.

With 11 months now in for 1986, analysts said it appears that inflation for the full year will end up at or slightly under 1.3%, which would be the lowest annual rate in 22 years.

But that low figure is due almost entirely to the plunge in world oil prices early this year.

(Consumer prices declined 0.7% in Los Angeles and Orange counties in November because of lower fuel prices, the government said. The price drop was the largest one-month decline since since December, 1982, said Sam Hirabayashi, regional commissioner of the U.S. Bureau of Labor Statistics.)

Rise Expected in ’87

Both government and private analysts are predicting that the nation’s inflation rate will heat up in 1987 to about 4%--roughly the pace that prevailed before world oil prices tumbled earlier this year.

The November increase in the Labor Department’s Consumer Price Index followed a 0.2% rise in October and translated into an annual inflation rate of 3.3%.

At the White House, presidential spokesman Larry Speakes said that “as 1986 comes to a close, it will be remembered as a year when inflation rose at a slower rate than in any year since 1964.”

“With personal income rising steadily and inflation held in check, American workers are seeing higher earnings buying more goods and services,” he said.

3.8% Inflation Last Year

In 1964, consumer prices increased a meager 1.2%. By contrast, prices rose 3.8% in 1985 and 4% in 1984.

For the first 11 months of 1986, prices have increased at an annual rate of 0.9%. Analysts said they expect December prices to show the same modest increases that occurred in November, pulling up the full year figure by several tenths of a percentage point.

“Rising prices will erase some of the increased purchasing power that consumers received from the collapse in oil prices,” said Sandra Shaber, an economist at Chase Econometrics. “But even if inflation returns to the 3.5% to 4% level next year, that is certainly not bad.”

Gasoline prices, down 2.4% in October, fell another 0.6% last month.

Food Prices Up 0.5%

Economists said, however, they expect to see moderate energy price increases in the December figures--increases that have already shown up in the Labor Department’s counterpart Producer Price Index.

Food prices at the consumer level increased 0.5% in November after rising 0.3% in the previous month, with increases registered across a wide range of products. Fruits and vegetables were up 1.5%. Beef, poultry, fish and eggs rose 0.6%.

Prices of new cars increased 0.9% in November, after a 0.8% October rise. Automobile financing charges were up 4.9%, reflecting the end of manufacturer financing discounts on 1986 models.

The November change left the overall Consumer Price Index at 330.8, meaning that goods which cost $10 during the base year of 1967 cost $33.08 last month.