The nation's economy was hit with new shot of inflation in January, sending consumer prices rising at twice their pace of the six previous months, the government reported yesterday.
In a new, broadened version of its consumer price index, the Labor Department said retail prices leaped 0.8 per cent, the most since April. By contrast, between July and December, prices were rising less than 0.4 per cent a month.
Combined with weather-related lay-offs and January's jump in Social Security taxes, the price rise was enough to sent purchasing power plummeting. Take-home pay of workers, adjusted for inflation and taxes, plunged 3 per cent in January - the largest such drop on record. But take-home pay remained 1.8 per cent above a year ago.
Consumer prices in the metropolitan Washington area rose 1.1 per cent in December and January (story on Page D7).
The White House was relatively unmoved by the price speedup, Jody Powell, the president's press secretary, said the development was "not seen as a basic change in the underlying 6 to 65 per cent" inflation rate that prevailed in 1977.
However, Julius Shiskin, the commissioner of labor statistics, who traditionally is cautious on long-range economic pronouncements, termed the January increase "a cause for concern." Shiskin called the rise "very strong and widespread."
By far the sharpest increases were for food, housing and medical services. Supermarket prices soared 1.4 per cent in January, compared to 0.4 per cent in December. Prices of meats, poultry, fish and eggs rose 2.7 per cent.
Analysts said most of the food-price rise stemmed from special factors, such as the recent California rainy season, which were not likely to be repeated. Sugar prices, for another example, rose sharply because of new duties and import fees.
however, Shiskin noted that wholesale prices have risen sharply in recent months - a development he said should keep retail prices climbing uncomfortably for some time. Economists have predicted inflation will speed up a little this year from 1977's pace.
Yesterday's report reflected a new system of calculating the consumer price index - the result of several year's work aimed at modernizing the index to conform to present-day consumer buying habits and broadening its scope to include a greater proportion of shoppers.
Yesterday the department published three separate indexes - a new one covering all urban consumers, a revised index for urban wage earners and clerical workers, and the old in- dex. Both new indexes showed the January rise at 0.8 per cent. On the old one, it was 0.7 per cent.
The new index for all urban consumers covers about 80 per cent of the U.S. population, compared with 40 per cent for the two their indexes. Economists had critized the earlier version for not providing a fully accurate measure.
The January increase brought the pace of inflation at the retail level for the past three months to an annual rate of 6.7 per cent - up sharply from the 4.5 per cent pace recorded for the similar period ending in December.
Along with rise in food prices, housing costs rose 0.8 per cent in January as a result of higher house prices and mortgage interest rates. Transportation costs rose 0.8 per cent, with a sharp jump in used-car prices. And medical and hospital charges jumped [LINE ILLEGIBLE]
The January increase left the overall consumer price index for all urban consumers at 187.2 per cent of its 1967 average. That means it took $187.20 to buy the same goods and services last month that cost $100 just 11 years ago.