WASHINGTON — Consumer prices nationwide increased 0.4% in October, the Labor Department reported Friday, adding fears of rekindled inflation to the nation's post-crash economic jitters.
Although the month's inflation rate was almost exactly in line with the average monthly price increase so far this year, it included broad increases in virtually every category. The rate was held down slightly by decreases in the energy category.
In the Los Angeles-Anaheim-Long Beach area, consumer prices for the month increased 0.5%. Since October, 1986, inflation in the area has run at 4.2%, compared to 4.5% nationwide during the same 12-month period.
Overall, the October report is the strongest evidence so far that accelerating inflation will be one of the costs of the declining dollar.
"We clearly have a lot of inflation left in the economy," said Irwin L. Kellner, chief economist at Manufacturers Hanover Bank in New York. He had predicted that the consumer price index would be virtually unchanged in October. Now, he said, "I don't expect any significant slowing until it is clear we are in a recession."
Allen Sinai, chief economist at Shearson Lehman Bros., had predicted a 0.2% uptick and pronounced the report "disturbing in its breadth, with increases across the board. The warning this throws off is that the falling dollar does have an effect."
He added: "It is disturbing to see inflation so widespread at a 4.6% annual rate--though it is somewhat slackened off from earlier in the year."
Michael Penzer, senior economist at Bank of America in San Francisco, took more comfort in that slackened pace, which reflects a leveling off last summer of the winter and spring surge in oil prices.
"We've had 10 months so far this year at an annual rate of 4.8%," Penzer noted. "But in the first five months of that period it was 5.6% and in the second it was 3.9%. That shows a downward trend. It shows we are facing a world of consumer price inflation of about 4% to 5%, which is manageable."
During the month, food prices increased 0.3% and medical care 0.4%. The cost of housing and transportation increased by 0.2% and 0.5% respectively, even though each was held down by lower fuel prices: a 0.7% decline in home heating fuel and other utilities and a 0.3% decline in gasoline.
Two of the largest factors in the October increase were new-car prices, up 0.6%, and the cost of clothing, up 1.3%. Both categories include a sizable amount of imported goods, illustrating graphically the impact of the declining dollar on the prices of imported goods.
But the Labor Department also noted in its Friday report that October is the month in which new product lines in autos and women's clothing feed a once-a-year price upsurge into the economy. For instance, the phase-out of summer auto-financing concessions pushed the cost of car financing up 5.8% in October.
Market Impact Unclear
In addition, suggested Christopher Caton of Data Resources Inc. of Lexington, Mass., the practice in recent years of offering summer car promotions has not yet been factored into the seasonal adjustments that the Bureau of Labor Statistics applies to the raw price data it compiles, so the October increase may have been slightly overstated.
Indeed, before adjustment, the consumer price index increased by only 0.9 points to 345.3, or 0.3%. This means that a basket of consumer goods costing $100 in 1967, the base year of the index, now costs $345.30.
Because Friday's report covered the month during which the stock market collapsed, the verdict on post-crash inflation seems cloudy. Oil prices have remained steady since the crash, suggesting price stability, while the dollar has fallen sharply, suggesting higher prices on imports and some domestic goods that compete with imports.
In addition, Kellner noted, recent reports on wholesale price inflation have shown steep increases in the prices of raw materials and intermediate goods--normally harbingers of accelerating consumer price inflation later on.
But Penzer noted that consumer jitters after the panic on Wall Street could well persuade retailers to hold the line on prices during the coming holiday buying season.
"Since the market crash, retailers have been concerned that hesitancy by consumers could bring on a recession, so you can expect they will be careful not to raise prices enough to scare off buyers in November and December," he said.