Consumer prices rose by just 0.1 percent in March, continuing a string of good inflation numbers this year that held price increases in the first three months of 1983 to their lowest for any calendar quarter since 1965, the government said yesterday.
In the past 12 months, consumer prices have climbed by 3.6 percent, while the rise for January through March was equivalent to an annual rate of 0.4 percent, the Bureau of Labor Statistics said yesterday. In February consumer prices actually dropped by 0.2 percent, after sesonal adjustment. The January rise was 0.2 percent.
The White House hailed the figures as evidence that "the underlying rate of inflation has fallen to a level below 5 percent. This is extraordinary progress." President Reagan's chief economic adviser, Martin Feldstein, told a congressional committee that "we can take considerable satisfaction from these very positive figures." But he added that it is too soon to say that inflation is "permanently under control."
Most analysts believe that the spate of exceptionally good figures on inflation is likely to end soon, and that higher energy and food costs will push up consumer prices in coming months. But they still expect inflation to stay below 5 percent for the year as a whole, far lower than the double-digit inflation rate that ushered in the 1980s.
The chief economist of the National Association of Manufacturers, Jerry Jasinowski, said yesterday, "As energy and gasoline prices stop falling, we will see some pickup in inflation. Adverse weather conditions are also causing food prices to rise." But he added, "We will have good price performance this year because of modest wage increases and productivity improvements."
Food prices already have begun to climb rapidly, with a 4.4 percent increase in fruit and vegetable prices last month "reflecting reduced supplies caused by the rainstorms in California and Florida," the Bureau of Labor Statistics report said. Overall, food prices were up by 0.6 percent in March, after several months of little or no increase.
Energy prices continued their decline last month. Gasoline prices dropped by 1 percent, leaving them 17.4 percent below their peak level of two years ago, the report said. The 5-cent-a-gallon increase in the federal gasoline tax in April, together with a halt to the decline in world oil prices, is expected to feed through to the consumer soon, experts say.
In March airline fares declined for the fourth time in the last five months, and autmobile finance charges dropped 1.9 percent, down for the eighth month in a row.
The CPI index stood at 293.4 (1967 equals 100) in March, the BLS said.
Yesterday's government release determined the next cost of living increases for Social Security and other benefit recipients. They will receive an automatic increase of 3 1/2 percent, reflecting how much prices rose between the first quarter of 1982 and the same period this year, according to the CPI for wage and clerical workers.
As a result of recent legislation to shore up the Social Security system, beneficiaries will not receive the cost of living increase until next January instead of this July. The adjustment will translate into an average increase of $14 a month for a single retired worker and $24 for a retired couple when both receive benefits.
The sharp slowdown in inflation in the last year and a half--the chief economic success of Reagan's administration--is largely a result of the deep recession that has held down wage and price increases, analysts say. The economy is now recovering from recession, with industrial production up in the first three months of 1983 and unemployment down from its December peak. However, the upturn is still fragile and is expected to be so slow that much of the gain against inflation will be maintained at least for the time being, analysts say.
Feldstein warned the Joint Economic Committee yesterday that the recovery could be threatened if the 10 percent income tax cut due this July is eliminated. The tax cut is needed to help boost consumer spending, which is still "fragile," he said.
The chairman of the Council of Economic Advisers also pointed out that, because of the slowdown in inflation, taxes are much lower in real terms than they would have been had inflation stayed high. Inflation increases tax burdens by pushing people into higher tax brackets when their incomes rise in order to compensate for price increases.
A family with an annual income of $20,000 will have a 1984 tax bill that is 19 percent lower in real terms than it would have been had inflation continued at the 1980 level, he said. The drop for a family with an income of $50,000 is 16 percent.