Consumer prices jumped 0.9 percent in January, with the cost of food, gasoline, automobiles and medical care leading the way, the Labor Department reported yesterday.
Barry Bosworth, director of the Council on Wage and Price Stability, warned the increases are likely to continue. "For the next several months," he told the congressional Joint Economic Committee, "I believe we will experience large price increases."
Early indications point to an overall increase in February nearly as big as January's, which works out to an annual rate of 11.4 percent. February's food price increase could be even larger than January's 1.4 percent rise.
In the last 12 months, consumer prices in the Washington area rose 10 percent, compared with 9.3 percent for all cities. During the past two months, however, local prices rose 2.4 percent, substantially more than the 1.5 percent nationally. (Details, Page F9.)
Presidential press secretary Jody Powell expressed concern about the big January increase, but said the White House doesn't expect the inflation problem to be cured any time soon.
Food prices have risen 12.4 percent in the last 12 months, and mearly three-fifth of that increase was due to higher farm prices, according to Howard Hjort, the Agriculture Department's chief economist.
Farmers demonstrating on the Mall have blamed food processors and distributors for most of the increase in food prices.
Moreover, Hjort said, the department has revised its prediction of likely food price inflation from 7 1/2 percent to 8 1/2 percent for all of this year. Since much of the increase in prices is expected to flow through to farmers, the estimate of net farm income for 1979 has just been increased from about $28 billion to " $30-plus billion," Hjort said.
Meat prices, in particular, continued to soar last month, rising 2.3 percent. Beef prices are now 40 percent higher than a year ago, Bosworth told the Joint Economic Committee.
Bosworth also singled out skyrocketing housing costs as a major trouble point in the anti-inflation fight. In the last 12 months, homeownership costs, as measured in the index, have gone up 12.4 percent, exactly the same as food.
"There is no reason to think the rapid escalation in housing prices will turn around," Bosworth said.
Higher mortgage interest rates, now at record levels nationally, have added 0.9 percentage points to the overall CPI increase. If mortgage rates had not risen, the CPI would be up 8.4 percent instead of 9.3 percent for the past year.
Hjort predicted that the February consumer price index, which will be released next month, will "show an increase on the order of 1 percent to 2 percent for food."
He went on to note that "since the fall of 1977 we have had one of those rare historical periods when the prices for almost all farm products have been increasing. Both crop and livestock prices have been increasing."
Part of the January and February increases is "a weather-related disturbance," Hjort continued, which means that most of this year's food price increases "will take place in the first quarter and into the second." Similarly, last year food prices rose 10.5 percent above 1977 levels, with most of the increase occurring in the first half of 1978.
Bosworth told the committee that he is convinced that the recent surge in consumer prices is not due to big companies ignoring the administration's price standards. They are complying he said.
His reading of the January increase in wholesale, or producers' prices, which were released two weeks ago, showed "some notable excess demand pressures" in the economy, Bosworth said. "It seems some small or mediumsized companies have taken advantage of the situation."
The wage-price council is stepping up its price monitoring effort to identify the products whose prices are rising mostly rapidly and to identify the companies producing them. Those companies will then be checked to see if they are in compliance with the price standards, which generally allow a firm to increase its prices by half a percentage point less than the firm's average increases in 1976 and 1977.
Bosworth said there are 10 or 12 industries the council will be checking first, and that it will take about two months. "Right now there is an attitude of some smaller firms that the program doesn't apply to them," he said.
The council director defended both the administration's forecast that prices will rise 7.4 percent this year and the wage-price standards when questioned by Sen. Jacob K. Javits (R-N.Y.) about both.
"Just because the inflation rate has stayed high for one month it does not mean that the 7 1/2 percent forecast for all of 1979 is invalidated," he said. And, Bosworth added, "I don't think the program is locked in concrete. If food and housing prices continue to rise as they have been, we will have to do something about it. But you can't revise the program after one month."
Another witness at the committee hearing, Brookings Institution economist Daniel Mitchell, said, "If it turns out that inflation in sectors beyond the reach of guidelines -- food prices, oil prices, and imports -- is accelerating, consideration must be given to adjusting the wage standard."
Oil prices are rising rapidly. Gasoline prices shot up 2 percent last month alone, and have been rising at a 22.6 percent annual rate for the last three months.
Used car prices have been going up just as fast for the last three months. Last month new car prices rose 1.1 percent.
Medical care costs went up 1.1 percent in January, but for the past 12 months have risen just about in line with all prices. In most recent periods, medical care prices have been rising much faster than other prices.
There were a few bright spots. Roasted coffee prices dipped 1.5 percent, continuing a long downward trend. Apparel prices have risen 2.3 percent in the last year and went up 0.1 percent last month.
Entertainment charges were up 6.1 percents over the year. Public transportation costs were up 1.8 percent, partly affected by lower airline ticket prices.