Wholesale Price Inflation Hits 4%--Highest Since ’81

From Times Wire Services

Wholesale price inflation hit 4% in 1988, the highest rate since 1981, with December producer prices rising by 0.4% after several months of lower inflation at that level, the Labor Department said today.

Economists noted that even with the summer drought pushing up food prices, the core rate of wholesale inflation--with food and energy prices excluded--was 4.3%. They called that a worrisome indicator of still higher inflation this year and beyond.

The gain in the department’s producer price index for finished goods, one stop short of the retail level, was nearly double last year’s 2.2% increase. It was the biggest gain since 1981, when costs jumped 7.1%.

The index was propelled upward by a drought-induced 5.7% increase in food prices. They had shown no change in 1987.


Meanwhile, energy prices, which had soared 11.2% in 1987, fell 3.4% in 1988. However, with the production agreement reached by the OPEC nations in November, analysts expect oil prices to head higher this year.

In December, food prices fell a slight seasonally adjusted 0.1%, energy costs edged up only 0.2%, but everything else jumped 0.6%, the biggest increase since September.

December was the third consecutive month of good news for grocery shoppers. Prices were unchanged in November after a 0.1% decline in October. However, that period of stability was preceded by seven consecutive months of increases from early spring through the summer.

With the end of unseasonally moderate temperatures in many parts of the country in December, fuel oil soared 8.5% and natural gas rose 3.3%.

For other items, a sharp 5.7% increase in tobacco prices and significant gains of 0.9% in automobile costs and 0.7% in women’s clothing led the index.

President Reagan, in his economic report to Congress this week, listed the taming of inflation as one of his proudest economic achievements. However, 1988 marks the second consecutive year of accelerating inflation.