Consumer prices rose 0.3 percent in October for the strongest increase since April, the Labor Department reported yesterday.
The 0.3 percent rise in the consumer price index last month broke a string of five consecutive monthly increases of 0.2 percent.
The consumer price index was 325.5 in October, meaning goods and services that had cost $10 in 1967 cost $32.55 last month. Another CPI measure used for indexing some collective bargaining agreements was 321.3 in October.
The Labor Department attributed the October increase to slightly higher food costs and a rise in new-car prices. The auto price picture was changed further by an increase in finance costs as the auto industry ended its low-interest-rate incentive programs.
However, costs of used cars and motor fuels declined, partially offsetting other increases.
Through October, consumer prices have risen at a seasonally adjusted annual rate of 3.3 percent compared with 4.0 percent for all of 1984. For the past 12 months, the CPI has risen 3.2 percent, Labor said.
Economists said that they had expected a higher increase in the CPI based on a sharp rise last month in the producer price index for prices at the wholesale level. Those prices rose 0.9 percent, the sharpest one-month increase since April 1981. Prices measured at the wholesale level generally are passed through to consumers later on.
Putting the CPI and PPI together, "there may be a little bit stronger inflation," although a lot of the increases were due to the one-time hike in auto prices. The October increase "is still a very low rate of inflation. There's a slightly firmer tone, but nothing to worry about."
"Basically, what we're looking for is continued low inflation through the end of 1986," said Deborah Johnson, an economist for Prudential-Bache Securities. Food costs are not expected to increase as sharply as they did in October. "They're going to grow at a pretty moderate pace," Johnson said. Housing and transportation costs will decline because of lower energy costs due to the weakness in worldwide demand for oil, she predicted.
Johnson said consumer-price increases probably would be 2.8 percent this year and 2.0 percent next year. If consumer prices continue rising at a 3.2 percent rate for the rest of the year, 1985 could have the lowest inflation since the 3.0 percent rate in 1967.
Consumer-price increases have remained modest since the end of the most recent recession in 1982 because of a weakness in oil prices and worldwide overproduction of many commodities such as food.
The high unemployment rate also is credited with maintaining lower wage levels while the large amount of unused plant capacity has prevented the bottlenecks and shortages that tend to increase the rate of inflation, economists have said.
One future problem could be an increase in import prices due to the decline of the dollar since February. Higher prices of imports in some industries would tend to lessen competitive price pressures, forcing domestic producers to keep their price increases modest. However, many economists said that import-related price rises could be only one-time increases and would not lead to spiraling inflation.
Last month, transportation costs rose 0.2 percent, marking the first increase since April. Automobile finance charges jumped 1.9 percent in October following 10 consecutive months of declines. The increase was attributed to the end in September of the cut-rate automobile financing programs.
Automobile insurance costs also rose 1.9 percent because of the costs associated with the change in the vehicle model year, Labor said.
But while the costs of automobiles themselves rose, the price of keeping them going declined as gasoline prices continued to fall for the fourth consecutive month. In October, gasoline prices were 13.5 percent below their peak level of March 1981. Used-car prices fell in October for the seventh consecutive month.
The $2 per proof-gallon increase in the federal excise tax on all distilled spirits which became effective Oct. 1 was blamed for the 0.4 percent rise in the food and beverage category, following a 0.3 percent increase in September.
Grocery-food prices rose 0.2 percent, following a 0.3 percent rise in September. The indexes for dairy products, cereal and bakery products, processed fruits and vegetables and other foods at home all declined in October. The indexes for meats, poultry, fish and eggs and for fresh fruits and vegetables rose by more than in September, the Labor Department reported.
Beef and veal prices rose for the second consecutive month, but were still below their level at the end of last year.
The index for household energy also fell last month. The index for household furnishings increased 0.4 percent after declining slightly in September. This index has risen 1.7 percent over the last 12 months, Labor said.
A 1.9 percent decline in natural gas costs and 1.4 percent drop in electricity prices contributed to the 0.6 percent decline in the fuel-and-other-utilities component. Fuel-oil prices, however, rose 2.4 percent for the second consecutive month. These prices are still below their level last year and 13.8 percent below their peak in April 1981