Consumer prices increased a scant 0.2 percent in September for the fifth consecutive month, triggering the smallest increase in Social Security benefits since that program was indexed to inflation 10 years ago.
For the past 12 months, the consumer price index has risen at a 3.2 percent rate, the slowest rise since a 3 percent inflation rate in 1967, the Labor Department said yesterday. Prices also rose at that rate for the first nine months of this year.
The low rate of inflation means that beneficiaries of Social Security and some other government programs will receive a 3.1 percent increase in benefits next year.
These benefits are adjusted with movements in a separate consumer price index -- CPI-W -- which measures prices for a smaller group of workers. That index increased an average 3.2 percent from the third quarter of last year to the third quarter this year. If it had been below 3 percent, there would have been no cost-of-living increase for Social Security recipients next year. The benefits increase was 3.5 percent in 1984 and 1985. Related story, Page A21.
Additionally, the modest rise in the consumer price index will be reflected in next year's personal income tax brackets and the personal exemption. The personal exemption, now at $1,040, will increase to $1,080 for 1986, and the standard deduction will increase from $2,390 to $2,480 for single filers, and from $3,540 to $3,670 for couples filing joint returns.
The income levels for each tax bracket also will rise, allowing more income to be taxed at lower rates. For example, in the 1986 tax year -- for tax returns filed in 1987 -- a two-earner couple filing a joint return with adjusted gross income of $40,000 would pay $111 less in taxes than they would have paid the previous year with the same income. A single filer with no dependents earning $20,000 would get a $44 benefit, the Treasury Department said yesterday.
Beryl Sprinkel, chairman of the Council of Economic Advisers, said at a meeting of bankers in New Orleans that although the consumer price figures for September were good, "that's still not price stability, but it's better than what we've had in the past."
Private economists said that it doesn't appear that inflation will be a problem for the forseeable future because of weakness in oil prices and declining prices for many commodities. However, some economists said that because business activity is expected to pick up slightly near the end of the year, prices may rise a little.
The inflation rate "has been held down for some reasons that aren't going to reoccur," such as low financing rates offered by some auto makers for cars, and "unduly depressed" food prices, said Paul Getman, economist for the Chase Econometric forecasting firm.
Getman also said that many consumers' incomes have risen more slowly than inflation has. "Consumers aren't benefiting very much. For some consumers, they're losing ground," Getman said.
However, a separate Labor Department report showed that inflation-adjusted gross weekly earnings of workers rose 0.7 percent in September following a 0.4 percent decrease in August and a decline of 0.6 percent in July. The increase was the largest since earnings increased 1.4 percent in April 1984, the Labor Department said.
"Notwithstanding certain earlier predictions of rising inflation, price increases have continued to remain moderate, principally because of the overvalued dollar, the slowdown in the economy since mid-1984 and the high level of unemployment," said Gordon Richards, director of economic analysis for the National Association of Manufacturers.
The rate of inflation has been slowing steadily all year. After rising at a 4.1 percent rate in the first quarter, the CPI grew at a 3.3 percent rate in the second quarter and a 2.3 percent rate in the third, the Labor Department said.
Since October 1981, Labor said, inflation has increased at a 4 percent annual rate, largely because of declines in prices for used cars, energy and grocery store foods. Partially offsetting those costs were higher prices in housing costs.
The increase in consumer prices last month was led by sharp increases in costs of apparel, medical care and entertainment, while prices for transportation -- including new and used automobiles and gasoline -- declined for the fifth consecutive month, Labor said.
The price of new cars rose 0.3 percent last month, compared with a 0.4 percent rise the previous month. Used car prices declined 0.2 percent after dropping 1.2 percent in each of the two preceding months, Labor said. Used car prices have fallen 5.5 percent since April.
Gasoline prices also declined, falling 0.8 percent, the same as in August. Gasoline costs last month were 12.8 percent below their peak level of March 1981.
Airline fares increased 1.7 percent last month.
Food and beverage costs increased 0.3 percent following mostly declining prices in the previous six months. Beef and veal prices rose 0.5 percent, their first increases this year. Poultry prices increased 0.9 percent and egg costs rose 3.5 percent last month.
The index for fresh vegetables increased 0.7 percent, largely because of higher lettuce prices. Restaurant meal prices increased 0.5 percent and costs of alcoholic beverages increased 0.3 percent.
Housing costs rose 0.2 percent in September, following a 0.5 percent rise in August. Fuel oil prices rose 1.6 percent last month, but were still 15.8 percent below their peak level in April 1981. Electricity costs increased 0.6 percent and natural gas prices declined 0.3 percent.