Soaring gasoline and fuel oil prices helped push inflation to 6.1 percent in 1990, the highest rate since 1981, and the purchasing power of the average American's paycheck took its worst tumble in that nine-year period, the government said yesterday.
The Labor Department's consumer price index finished 1990 with moderate, seasonally adjusted increases of 0.3 percent in both December and November.
But the earlier shock to oil prices in the wake of Iraq's Aug. 2 invasion of Kuwait helped make 1990 the worst inflation year since 1981, when the rate was 8.9 percent. Consumer prices climbed 4.6 percent in 1989.
Gasoline prices were up nearly 37 percent and fuel oil prices nearly 30 percent. The cost of meat, medical care, airline travel, tuition and tobacco also rose steeply during the year, the department said.
Meanwhile, output at factories, mines and utilities fell in December for the third consecutive month, signaling the recession has not yet bottomed, according to analysts.
The Federal Reserve's gauge of industrial production fell 0.6 percent last month after declines of 1.8 percent in November and 0.7 percent in October.
"Three months of declining industrial production show the recession has taken a firm grip on the American economy," said economist William K. MacReynolds of the U.S. Chamber of Commerce.
"We think that the recession will last longer than is generally believed."
The Commerce Department said business inventories grew 0.3 percent in November while sales fell 1.2 percent. Rising inventories of goods held on shelves and storage lots are a sign of economic weakness. They could foreshadow production cutbacks and layoffs at factories if sales do not pick up.
A separate Labor Department report on weekly earnings of non-farm, non-supervisory workers indicates the economy will not be helped soon by a resurgence of consumer spending, economists said.
Adjusted for inflation, the average weekly paycheck rose 0.9 percent in December, but slipped 1.6 percent over the year.
It was the seventh consecutive year without an increase, and the biggest drop since 1981, when the economy was sliding into the last recession.
"It's going to be difficult to improve consumers' confidence if they don't have any purchasing power in their pockets," said economist Donald Ratajczak of Georgia State University.
Analysts expect lower inflation this year because of the sluggish economy. They also expect falling oil prices if the Persian Gulf crisis is resolved.
Energy prices, which had risen sharply in the three months following Iraq's invasion of Kuwait, fell 0.4 percent in December. For the year, energy was up 18.1 percent, the worst since 1979.