.3% Price Hike Cools Inflation Fears : Apparel Costs Down; Food, Energy Stable on Nov. Index

The threat of a jump in inflation anytime soon subsided today when the government reported a modest 0.3% increase in consumer prices in November which slowed inflation to an annual rate of 3%.

The hike in the Labor Department’s consumer price index was moderated by a sharp downturn in apparel prices and small or no increases in prices for food, energy and shelter.

The 0.3% increase last month followed a 0.7% jump in the index in October, when analysts worried about a sharp spike in the cost of living.

Concern Discounted

“But the inflation fears were overstated,” said Donald Ratajczak, an expert with the Georgia State University economic forecasting center in Atlanta. “Right now, people are more scared about inflation than reality suggests,” he added.

“Excluding food and energy, which are the most volatile components in the index, prices were up only 0.3%, so inflation looks pretty stable,” agreed David Wyss, chief financial economist for Data Resources Inc. in Lexington, Mass.

The November inflation report is unlikely to persuade the Federal Reserve Board to push up interest rates to slow the economy, which is the Fed’s chief weapon in the fight against inflation, Ratajczak said.

Figured on an annual basis, the rise in inflation in November was only 3%. Inflation in 1988, through November, was 4.4%, the same as for all of 1987, according to the department’s Bureau of Labor Statistics.

After a 0.2% increase in October, food prices were unchanged last month. It was the first time since February that food prices did not rise, lending credence to the belief that the effects of the summer drought have eased.

“We can stop talking about the drought,” said Ratajczak, who expects some moderate increases in food prices in the months ahead. But, he added, “we’re not going to see those big price jumps that we had in the summer.”

Grocery store food prices, which jumped 10.9% in the six months preceding September, were unchanged in November. Prices for meats, poultry, fish, eggs, and fruits and vegetables declined. Fresh fruit produce prices declined.

Apparel and upkeep prices, which include the cost of laundering and dry cleaning, declined 0.3% last month after sharp increases the previous two months, when fall and winter clothing was a big seller. Sales for footwear and women’s clothing were responsible for the November decrease in clothing prices, the department said.

Also today, the Commerce Department said the gross national product, the broadest measure of economic health, expanded at a moderate annual rate of 2.5% in the third quarter, held back by the summer drought. For the same period, the department reported that after-tax corporate profits rose 3.9%, down from a robust 8.9% increase the previous quarter.