Consumer Prices Up 0.3% in Month : Moderate Increase Indicates Inflation Is Remaining in Check

Consumer prices continued to rise at a moderate pace during January, the Labor Department reported Friday--confirming that inflation remains largely in check despite some fears that inflationary pressures may be about to intensify.

The department said its consumer price index rose 0.3% during the month, after a 0.2% increase in December. That was in line with the pace that has prevailed for most of the last eight months. The December figure was revised from an 0.1% rise published in last month’s report.

Separately, the Commerce Department reported that consumer spending continued to slow in January, and the personal incomes of Americans grew less rapidly as well.

Consumer Spending Off

Spending by consumers rose 0.3% in January, down from 0.7% the previous month. However, much of the slowdown reflected a falloff in automobile sales, which traditionally are volatile.

With auto sales excluded, the rise for both months was 0.4%. Analysts said the steady consumer spending shows that the economy has been holding up well in the wake of the Oct. 19 stock market crash.

The figures were released as former Federal Reserve Board Chairman Paul A. Volcker, speaking in San Antonio, called for enactment of a broad-scale consumption tax--such as a sizable increase in gasoline taxes--to help reduce the federal budget deficit and slow consumer spending.

Volcker said he believes the budget deficit has grown so large that spending cuts alone cannot cope with it.

15-Cent Tax Hike

“I do not think this problem is insoluble,” he said. “Is it really so impossible to add 10 or 15 cents to the gasoline tax?”

It was his first major proposal for dealing with the nation’s economic problems since he left office last summer.

Economists were divided as to the inflation outlook in the wake of Friday’s report. A. Gary Shilling, president of a Wall Street economic forecasting firm that bears his name, said Friday’s consumer price report shows “more of the same.” Inflation, he said, is likely to remain moderate for the next several months.

However, Joel Popkin, a Washington-based economist who specializes in monitoring inflation trends, said he expects the inflation rate to accelerate in the second half of this year.

Pressure on Prices

Popkin predicted that prices would come under pressure from three forces--a speedup in wage increases throughout the economy following wage restraints last year; the recent rise in crude materials prices, which will eventually spread to retail goods, and higher prices for foreign goods as a result of the recent decline in the value of the dollar.

The January index “hasn’t yet begun to show the kinds of increases we’re going to see,” Popkin said.

The January increase was not quite as benign as the overall figure suggested. Although food prices rose a relatively modest 0.3% and energy prices fell 0.8%, the rest of the index jumped a hefty 0.5%, following a 0.2% rise in December. Medical prices leaped 0.8% in January, and entertainment costs rose a steep 0.6%. Hotel prices also climbed sharply.

A separate index, calculated on a different basis from the national figures, showed that consumer prices in the Los Angeles-Long Beach-Anaheim area rose 0.2% during January, after a 0.3% rise the previous month. Over the last 12 months, consumer prices in the Los Angeles area have risen 4.6%.

4% Rise in 12 Months

The January increase brought the overall consumer price index to 115.7% of its 1982-1984 average, which means that it now takes $115.70 to buy the same goods and services at retail that cost $100 five years ago. During the last 12 months, consumer prices nationally have risen by 4%.

The Commerce Department report showed that the personal incomes of Americans rose 0.3% in January, compared to an 0.7% rise in December. The figure is not adjusted to reflect inflation.

A LEVEL PLAYING FIELD Monthly changes in the consumer price index

January, 1987 0.7% February 0.4 March 0.4 April 0.4 May 0.4 June 0.3 July 0.3 August 0.4 September 0.3 October 0.3 November 0.3 December 0.2 January, 1988 0.3

SOURCE: Bureau of Labor Statistics