Inflation Rises 0.4% Despite Economy’s Lag : Prices: The slowdown could hold down the cost of goods while the cost of services continue to rise.

Consumer prices advanced 0.4% last month, the Labor Department said Tuesday in a report that reflected inflation’s stubbornness even in the face of a weakening economy.

Higher prices for food, home heating and new cars were the prime reasons for the somewhat higher-than-expected inflation rate for November.

But economists saw more significance in the fact that inflation is slowing sharply for goods and commodities, while inflation in the dominant services sector remains higher. Inflation was 0.6% for services in November but only 0.2% for goods.

Consequently, the consumer price index, which rose at an annual rate of 6.7% in the first five months of 1989, has advanced at a rate of only 2.8% since then.

In the Los Angeles-Long Beach-Anaheim metropolitan area, consumer prices before seasonal adjustment were unchanged, compared to a 0.2% unadjusted increase nationally. Over the last 12 months, inflation in the region was 4.8%, compared to 4.7% nationally.

In other reports Tuesday, the government underlined the slowdown that may continue to hold goods prices lower even while services keep rising.

Inflation-adjusted average weekly earnings declined 0.7% in November and are down 1.5% over the last 12 months, the Labor Department said. The monthly decline was spread evenly across most sectors, but over the last year the brunt has been borne by manufacturing, public utilities and, to a lesser extent, retail trade and construction.

At the same time, the Commerce Department reported that private housing starts in November were 13% below the level of a year earlier and, at an annual rate of 1.4 million, 4.7% below October.

At the same time, November building permits slumped 2% below October and 12% below November, 1988.

On the inflation front, the outlook for the short run appears to be more of the same, although the components of the price rise may shift.

Donald Ratajczak, economist at Georgia State University, said food prices may continue to rise because of shortages in meat and dairy products caused by high cattle slaughter rates during the 1988 drought.

But the increase in prices for new autos and trucks, 0.8% in November, will almost certainly be reversed, he said, because cars are not selling at current prices.

“By slowing things down in the economy, you can control commodity-based inflation or prices of manufactured goods,” Ratajczak said.

“But services is the price battle you can’t win easily, because it is wage based, and it keeps going up--until you throw people out of work.”

HOUSING STARTS Nov. ‘89: 1.36 Source: Commerce Department

CONSUMER PRICE INDEX Nov. ‘89: +0.4 Source: Labor Department