Consumer prices jumped 0.6 percent in December, pushing the cost of living up 9 percent last year -- the biggest increase since 1974, the government reported yesterday.
Government analysts said the December increase would have been even higher -- up another 0.2 percent -- had it not been for California's Proposition 13, which cut local property taxes.Food and fuel again led the way in December.
The 1978 increase was much larger than the 6.1 percent rate the administration had forecast at the beginning of the year.
President Carter, in his new budget, predicts that consumer prices will rise 7.4 percent this year. Private economists, however, expect the rate to be significantly higher.
As a result of last year's price increases, the after-tax buying power of the average worker dropped 3.4 percent, according to a companion report released by the Labor Department yesterday.
Approximately 3 million retired federal workers -- both military and civilian -- and their survivors will receive a 3.9 percent cost-of-living increase as a result of the year-end inflation figures. The increases will go into effect March 1, but will not be reflected in benefit checks until early April, according to government officials.
Another 9 million union workers covered by cost of living escalators in their contracts and 34 million Social Security recipients also will receive pay or benefit increases of varying amounts based on the 1978 price statistics.
In the metropolitan Washington area, the government reported that supermarket prices soared 1.9 percent in December -- the largest monthly increase in 1978. Food prices in the area averaged 13.5 percent higher at the end of 1978 than they were a year earlier.
Nationwide, the cost of food in grocery stores rose 0.8 percent in December, led by large increases in the prices of meats, fresh milk and other dairy products. Beef, pork and poultry prices accelerated substantially for the third straight month.
For the year, the government's food and beverage index soared 11.6 percent -- the single largest jump of any category.
Gasoline prices climbed 1.9 percent in December, bringing the year-end total in that category to 8.5 percent.
The cost of home ownership also continued its steady rise, increasing 9.9 percent over the year. In December, house prices increased 1.1 percent, while mortgage interest rates climbed 1.6 percent. Natural gas prices, which declined 2.3 percent in November, jumped 0.7 percent last month, and fuel oil prices went up 1.3 percent -- the fourth consecutive month of large increases.
There was one bright spot in the price picture: the cost of medical care eased in December, rising 0.4 percent, compared with increases of 1.1 percent in both October and November. Government analysts attributed this slower rise to smaller increases in doctors' bills and hospital costs.
But overall, there was little in yesterday's report for the Carter administration to pin its hopes on for a lower inflation rate.
Administration officials blamed the unexpected acceleration of prices in 1978 on several factors. Chief among them were high food prices, high interest rates and the depreciation of the dollar.
One private economist -- Otto Eckstein, president of Data Resources Inc. -- has tried to estimate the contribution each of these factors made to aggravating the inflation rate last year. His study shows that abnormally high food prices added 0.7 percentage points to inflation, home ownership costs sparked by high mortgage rates added 0.6 percentage points, and the weakened dollar added 0.4 percentage points.
In the year ahead, White House planners are counting on several factors to ease inflation. They expect the voluntary wage-price program to break the momentum of high prices. They assume that a tighter federal budget and high interest rates will slow the economy and squeeze out some inflationary pressures. And they are betting on a stronger dollar.
But private analysts see a different scenario unfolding -- one that will dash the administration's hopes of a lower inflation rate. They expect a sharp rise in energy costs, shortages in some food items and a series of costly strikes to keep inflationary forces strong in 1979.
With the exception of the 12.2 percent inflation level in 1974, consumer prices last year accelerated at a faster rate than at any time since 1947.
The Consumer Price Index finished the year at 202.9. That meant goods and services priced at $100 in 1967 cost $202.90 last month.