Consumer Prices Up 0.7%, Biggest Increase Since 1982 : Cost-of-Living Gauge Revised for New Expenses

WASHINGTON — The government, revising its principal cost-of-living gauge to better reflect how Americans spend their money, said today that consumer prices surged 0.7% in January.

It was the largest monthly increase since a 1.1% rise in June, 1982. The January increase, if continued for 12 consecutive months, would equal annual inflation of 8.3%. Sharply higher costs for energy, particularly gasoline, paced the surge in prices.

January’s sharp price rise followed a 0.2% increase posted from November to December.

The previous month’s increase worked out the same under both new and old accounting methods, government analysts said, and the January rise would have been an even higher increase of 0.8% under the old system.

Greater Weight to Housing

(Prices paid for goods and services purchased by consumers in the Los Angeles area rose 0.7% in January. Sam Hirabayashi, regional commissioner of the Bureau of Labor Statistics, said most of the increase was due to higher prices paid for consumer commodities--principally groceries, women’s apparel and gasoline.)

Energy costs were accorded less relative importance in the new tabulation, as was spending on food and clothing. Meanwhile, greater weight was given to housing costs and consumer electronic goods than in the past.

The CPI measures the cost to urban consumers of a fixed “market basket” of goods and services, with each entry given a different weight based on its relative importance to a consumer’s budget. The old CPI reflected spending patterns of 1972-73 while the new one reflects those of 1982-84.

Energy was downgraded, for example, because Americans were spending less of their household budgets on it in 1982-83 than they were in 1972-73, partly due to lower energy costs and partly due to increased energy conservation and fuel efficiency, Jackman said.

A variety of new items were added to the index, including videocassette recorders, personal computers and financial services.

Overall, analysts said services now make up 52% of the total index, the first time they have surpassed goods in relative budget importance.

Different Profile

The new index also shows a different profile of the average American urban consumer. The former index was based on a consumer with an average household income of $12,332, while the revised figures will be based on an income of $23,183, reflecting an increase in two-earner households.

The government revises the index about once every 10 years. The last major overhaul was in 1978.

Economists were divided on how the new tabulations would influence inflation rates, with some estimating that it could add up to 0.3 percentage points to the annual rate.

Gasoline prices in January increased 6.6% over December levels, while fuel oil was up 7.2%.

Housing costs were up 0.5%, and food costs rose 0.5%, with increases posted in almost all categories except meats, fish and eggs, which declined 0.2%.

The Labor Department gave these other details on January prices.

--Clothing prices rose 0.4%.

--The cost of medical care was also up 0.4%.