The Washington metropolitan area registered the lowest inflation rate in more than a decade for the 12 months ended January 1983, primarily because of falling gasoline prices and mortgage rates.
The 4 percent rise in area consumer prices was less than half the previous year's increase of 8.1 percent and smaller than any increase since area prices rose 4.1 percent during the 12 months ending in November 1971.
The slowdown in the rate of inflation--a side effect of a recession that has challenged the Washington area's reputation as recession-proof--brought welcome relief to the region's consumers. Food prices, as well as transportation and housing costs, also rose by a relatively small 3.6 percent from January 1982 to January 1983.
The largest price increases during the 12 months were in medical expenses, which rose by 17.3 percent.
During the two months ended in January, area prices rose 0.9 percent in contrast to consumer prices for the nation, which fell by 0.2 percent. The contrast, however, was typical of the pattern for the previous year, in which prices in the D.C. area either have lagged behind or jumped ahead of prices nationally.
For the full 12 months ended in January, however, the increases in area and national prices were not very different at 3.8 percent compared with 4 percent for the D.C. area.
With the consumer price index report released yesterday, the Bureau of Labor Statistics changed its measurement of home ownership costs to reflect less of the purchase price and mortgage costs, which represented the cost of housing as an investment as well as the cost of shelter. Instead, the CPI now reflects the implicit rent owners would have to pay to rent the homes they own.
Before the change, interest rates had a huge impact on the price index as they went up and down. For instance, using the old formula, prices for the 12 months ended January 1983 went up 3.3 percent, reflecting, in large part, a sharp decline in mortgage interest rates. If shelter were eliminated as an item in the index, prices would have risen 5.2 percent, Thomas said.
For the two months ended in January, the housing index rose 1.3 percent, reflecting higher rentals and natural gas prices. The cost of food and beverages rose 0.8 percent, following a decline of 0.9 percent from September to November.