Wholesale prices, which foreshadow prices consumers eventually pay, rose 0.9 per cent in December, faster than the 0.6 per cent rise in October and November, the Labor Department reported yesterday.
But nearly all the increase was due to large rises in farm products and processed foods and feeds. The key index of industrial commodities slowed its rate of increase substantially, to 0.3 per cent from 0.8 per cent in November and 1 per cent in October.
Commissioner of Labor Statistics, Julius Shiskin told the Congressional Joint Economic Committee that food prices behave erratically, moving up sharply one month and down sharply another, even after adjusting those rises and falls for seasonal variation.
Industrial commodities move less erratically changes in their prices are more likely to become imbedded in the overall price level. So while the overall wholesale price index rise was bigger than in November, the slowdown in industrial prices meant the price report was essentially good news.
Economists do not expect the sharp rise in food prices which occured in December to continue, although beef prices should rise for a good part of 1977 at last yeat's surplus turns into something of a short supply. Coffee prices, due in large part to a freeze which damaged trees in Brazil in 1975, will continue to rise as will coffee substitutes such as tea and cocoa although not nearly as fast.
Some food prices which surged in December such as eggs, have already begun to fall. The Department of Agriculture estimates that food prices (See Prices, D15, Col. 4> will rise no more than 3 or 4 per cent in 1977.
While the Ford administration was far off on its predictions about the course of the economic recovery and improvement in the jobless picture (unemployment was 7.9 per cent in December, a full percentage point higher than the administration predicted)z, it appears that Ford will meet or better his inflation prediction.
The President said he hoped consumer prices would rise only between 5 and 6 per cent in 1976. Consumer prices are increasing close to 5 per cent. The final 1976 figures will be released next week.
Wholesale prices were 4.7 per cent higher in December 1976 than they were in December 1975.
The modest increase in industrial prices occurred despite large jumps in lumer and wood products, metal such as steel and aluminum and hides and skins. Fuels, which rose 2.7 per cent in November, declined 1.2 per cent in December.
The increase announced by oil-producing countries should drive fuel prices up i February and March. John Layng, the chief price analyst for the Bureau of Labor Statistics, told the Joint Economic Committee yesterday that a 10 per cent rise in the cost of imported crude oil would raise the wholesale price index initially 0.3 per cent and the consumer price index 0.1 per cent.
The wholesale price index stood at 185.6 per cent of its 1967 average in December, which means that a selection of goods which cost producers $100 in 1967 cost $185.60 last month.