Wholesale price inflation in 1982 was 3.5 percent, the lowest increase in 11 years, the government reported yesterday, amid new evidence that the recession may have hit bottom in December.
The Labor Department reported the producer prices index rose 0.1 percent last month. Larry Speakes, deputy White House press secretary, called the price report "good news for the economy." He said it "indicates we have continued to make substantial progress in attacking the underlying rate of inflation." The Federal Reserve Board yesterday reported that industrial output slipped by only 0.1 percent in December. This drop in production was smaller than those recorded in the previous four months. The nation's industrial production plummeted 8.2 percent in 1982, the largest drop in eight years.
Factory output dropped by 12.5 percent between July, 1981, when the recession began, and last December, the Federal Reserve said. However, economists said yesterday the small decline in industrial production last month adds to the evidence that the recession may be bottoming out. "It looks like the beginning of the upturn" could be this month, said Otto Eckstein of Data Resources Inc. Strong increases in auto production, together with the mild weather so far this month, should help push January industrial production up, analysts said.
Both the price and output figures for December were calculated after seasonal adjustment.
Many economists believe that the dramatic slowdown in inflation over the past two years has been due in large part to the deep recession, which has pushed factory output down close to its level of five years ago and sent unemployment to a post-World War II record of 10.8 percent.
In a separate report, the Federal Reserve reported money supply figures for the end of 1982 that showed growth of M1 and M2 exceeded the Fed's targets for the year. The narrow M1 measure, which includes cash and checking accounts, rose by 8.5 percent from the fourth quarter of 1981 to end 1982, compared with an upper target limit of 5.5 percent. M2, which includes some savings accounts, rose by 9.9 percent, compared with an upper limit of 9 percent.
The December increase in wholesale prices was significantly below the 0.5 percent and 0.6 percent increases recorded in October and November. If wholesale price inflation continued at the December rate for 12 months, it would result in an annual increase of 0.8 percent after compounding, the Bureau of Labor Statistics said. During 1981 producer prices climbed by 7.1 percent, almost twice as large as last year's increase.
Sharply lower energy costs were another important factor holding prices down last year, according to the Labor Department. Gasoline prices plunged 8.6 percent in 1982, the largest annual decline since record-keeping began in 1947.
By December, 1982, the index of prices for finished energy goods was 0.1 percent below its level a year earlier, the department said, compared to a 14.1 percent increase in the previous year. During December, finished energy goods prices dropped by 0.7 percent, after a sharp 2.9 percent increase the previous month.
Consumer food prices rose by 0.1 percent in December, bringing the increase during 1982 to 2.1 percent, up slightly from the 1.4 percent increase in 1981.
Prices of non-durable goods declined by 0.2 percent during December, probably because of Christmas sales, Eckstein said. In contrast, prices of capital equipment climbed by a "disturbing" 0.6 percent in the month, Eckstein noted.
This came despite the continued weakness in the business sector. Output of business equipment slipped by 0.3 percent last month, the Federal Reserve said. This was a much smaller decline than in the previous three months.
The Federal Reserve has revised down the preliminary figures it published for industrial production in October and November. These now show a decline in output of 1.1 percent in October and 0.7 percent in November, yesterday's report said.
During December there were "sizable increases . . . in the output of automotive products and defense and space equipment," the report said. These were not enough to offset "continuing weakness in the production of home goods, business equipment, construction supplies and durable materials," it said.
Consumer goods production rose last month by 0.2 percent, the Federal Reserve said. Within this total, durable goods production climbed by 1.9 percent, pushed up by a 13 percent rise in auto assemblies. These reached an annual rate of 5.1 million units during December, the report said.
However, "production of home goods and nondurable consumer goods contracted further" during the month, according to the Fed. Production of defense and space equipment rose for most of 1982, with sharp increases in each of the last three months. In December, output in this category climbed by 2.1 percent.
While the price index for finished goods rose by 0.1 percent last month, that for intermediate goods held steady and for crude goods dropped by 0.9 percent. The finished goods index stood at 285.1 before seasonal adjustment in December, based on an index base of 100 in 1967