The cost of the marketbasket of goods and services covered by the consumer price index was misstated in Saturday's editions of The Washington Post. The goods and services that cost $10 in 1967 cost $22.99 in December.
Consumer prices shot up 1.2 percent in December, the most in any month last year, and prices for the year rose 13.3 percent, the most since 1946, when President Harry Truman lifted wartime controls, the Labor Department reported yesterday.
Presidential inflation adviser Alfred E. Kahn gloomily warned, "In the months ahead, I don't think anyone can honestly expect an improvement."
Meanwhile, two major banks, Citibank and Bankers Trust of New York, which had tested the waters with a lower 15 percent prime lending rate, came back up to 15-1/4 percent yesterday. Interest rates have been rising for several days, reflecting a financial market fear that the Federal Reserve may tighten credit again to restrain inflation.
Kahn told Congress' Joint Economic Committee that recent OPEC oil price increases will clobber the consumer price index for January and February. Mortgage interest rates in the index also will continue to rise, he said.
Energy and homeownership costs were the major factors driving up the CPI throughout 1979.
Gasoline prices rose an average of 35.7 cents a gallon, a 52.2 percent increase. Home heating oil prices climbed almost as much, 33.8 cents a gallon, a 56.5 percent rise for the year.
The price of food from grocery stores, on the other hand, rose only 9.5 percent in 1979. In December, however, food prices jumped a sharp 1.4 percent after seven months of much smaller increases. Agriculture Department economist Howard Hjort said yesterday he expects food prices to go up 8 to 9 percent this year.
The steep 13.3-percent rise in the CPI during 1979 knocked 4.5 percent off the purchasing power of the hourly pay of an average workers in private industry, the Labor Department said.
Since that worker also was working fewer hours each week last month than a year earlier, the purchasing power of his or her weekly take-home pay was cut even more, 5.3 percent.
At year's end, the purchasing power of the average worker's hourly pay was no higher than it was nine years ago.
The only solution to inflation, Kahn said, "is restraint on the demand side and more attention to the supply side . . . We have to develop a leaner, more disciplined, more productive society."
Aside from the volatile energy, homewonership and food components, Kahn said the remaining portions of the CPI "showed a clear tendency to creep up during the year." From a rate of increase of about 7 percent in the first three months of 1979, this "underlying rate of inflation" was running at an 8.6 percent annual rate in the last three months.
A large part of this acceleration in the underlying rate of inflation, Kahn said, was due to a dismal productivity performance last year. The Council of Economic Advisers, he said, estimates that output for each hour worked grew 0.4 percent in 1977 and 1978 after certain cyclical adjustments. In contrast, it plunged 2.2 percent in 1979. A drop in productivity increases labor costs and helps push up prices.
Last month's CPI also was pushed up by a 1.2 percent increase in medical care costs, the largest rise in several months. Over the year, medical care costs rose 10.1 percent.
After three-fourths of the December increase in food costs was due to higher prices for beef, pork and poultry. Egg prices and the cost of cereal and bakery products also rose sharply last month, the department said.
Kahn, like Hjort, said he expects food prices to be a mildly moderating influence on the overall inflation rate for several months, but cautioned that food prices might be rising more rapidly later in the year.
One reason for the limited optimism about food prices was seen in an Agriculture Department report yesterday that the nation's stocks of soybeans, corn and other feed grains stood at record levels on Jan. 1. The 48.2 million metric tons of soybeans in storage was up 27 percent from a year ago, and the 172-million-ton corn stock was up 9 percent. A metric ton is 2,200 pounds.
The record quantities of grain put new pressure on the Carter administration to come up with a plan to cut crop production this year and prop up farm income. The White House is considering paying farmers not to plant some there land this spring, and has promised a decision by March 1.
The 13.3 percent rise in the CPI in 1979 meant that last month it took $22.29 to buy the same amount of goods and services $10 would have bought in 1967. Consumer prices rose 9 percent in 1978.