Wholesale prices rose a sizable 0.7 per cent last month and 6.6 per cent in all of 1977, the Labor Department reported yesterday.
The December increase was mainly due to food; the price of food ready to move to supermarket shelves jumped 1.5 per cent. But non-food prices, which economists regard as a better indicator of the true inflation rate because they behave less erraticaly, rose only 0.3 per cent.
The bad inflation news - the December increase is equivalent to an annual inflation rate of 8.7 per cent - came one day after some expectedly good news on the unemployment front. The Labor Department said Wednesday that joblessness fell in December to 6.4 per cent, a three-year low.
These shifting statistics may make it harder for President Carter to sell Congress on the $25 billion tax cut he is expected to propose later this month to stimulate the economy. If unemployment keeps going down and inflation remains high, legislators may not be receptive to cutting taxes.
But the President said at his news conference yesterday that while the administration expects good economic news through June in the form of declining unemployment and continued growth - the economy will need the pick-up a tax out would give it during the last half of the year.
Yesterday's price report was based on a new government index that covers "finished goods" that are ready for final sale to the ultimate user.
This replaces the old wholesale price index, which was faulty in that it double-counted some price increases.
Under the old way of measuring, wholesale prices rose 0.5 per cent in December, less than the 0.7 per cent in November.
But under the new system the December rate of 0.7 per cent was higher than November's 0.4 per cent.
The finished goods index covers prices of goods sold to both consumers and businesses where the businesses are the final users, as in the case of machinery.
The department is also publishing two other indexes to measure prices of so-called intermediate products and crude materials.
The old wholesale index lumped all these stages of processing together.
For example, in the old index, an increase in the price of iron ore could be counted first at the mine, then in higher cost of a car rolling off the assembly line exaggerating inflation.
The new finished goods index counts the iron ore price increase only once: in the car or in any other final product that contains iron products.
The intermediate goods index, which rose only 0.4 per cent in December, captures the higher steel price, while the crude goods index, which rose 13 per cent last month, reflects the higher iron ore price increase.
The finished goods index should project inflation trends over the next several months, the intermediate goods index should foretell price increases that will not hit the consumer for six months to a year, and the crude gods index should show price trends that are a long way off.
The Labor Department said the 1.5 per cent rise in consumer foods, following much smaller increases in October and November, reflects increases at the farm level during the fall. The department cited pork, processed poultry and vegetable oil products as rising the most in December. Fresh fruit and vegetable and coffee prices declined.
Gasoline prices rose, but less than in November, while home heating oil prices declined after a November increase. Jewelry and household furniture prices rose. In all, non-food consumer goods rose 0.2 per cent, while producer finished goods increased 0.5 per cent. Overall non-food finished goods increased 0.3 per cent.Among producer goods, the Labor Department cited price increases among agricultural machinery and plastic and rubber machinery. Relatively small price advances were recorded for transformers, measuring instruments and commercial furniture.
All price increases are adjusted to account for normal seasonal variations.
John Layng, the top price analyst for the Bureau of Labor Statistics, said that while super market prices can be expected to rise in the next few months, consumers should expect other prices to behave moderately through midyear.