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1989 Inflation Up to 8-Year High of 4.6% : Prices: Figure boosted by double-digit increases for dairy foods, eggs and fuel oil.

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From Associated Press

Inflation in 1989 rose to an eight-year high of 4.6%, boosted by double-digit price increases for dairy food, eggs and fuel oil, the government said today.

Consumer prices rose a moderate 0.4% in December, despite a cold-weather jump in fuel oil costs.

The year’s rise in the Labor Department’s consumer price index marked a modest acceleration over the 4.4% rates posted in 1988 and 1987. Still, it was the steepest increase since 1981, when prices shot up 8.9% in a lingering aftershock from the double-digit inflation of 1979 and 1980.

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Meanwhile, the Labor Department said in another report that Americans’ inflation-adjusted earnings were unchanged in December after falling 0.6% in November. Average weekly earnings were $340.81 in December, up 3.2% from a year earlier--not enough to keep up with inflation.

Food prices jumped 5.6% in 1989, their steepest rise in nine years, beating the drought-induced increase of 5.2% in 1988.

For December, food costs were up 0.4%, the same as November. Many analysts had expected the unseasonably cold weather near the end of the month to drive up fruit and vegetable prices. However, those prices actually fell 1.3%. The full force of the freeze, which dipped as far south as Florida and Texas, probably will show up in January prices.

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Dairy products rose a sharp 2.2% in December, bringing the increase for the year to 10.3%. Economists say dairy prices in 1989 were still reacting to increased slaughtering of herds during the previous summer’s drought.

The price of meat, poultry fish and eggs jumped 1% in December.

Much of that was attributed to a 3.7% advance in egg prices, which climbed 35.4% for the year.

Energy prices gained 5.1% last year, driven up by a 19.5% rise in fuel oil prices. Fuel oil increased 3.8% in December, and a congressional committee is investigating allegations that oil companies used the cold weather as an excuse to grab profits.

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Gasoline prices, which soared early in the year, fell in six of the last seven months of 1989, including a 2% drop in December. For the year, they were up 6.5%.

Natural gas prices increased 2.1% last month, while electricity rose 0.8%.

Prices excluding the volatile food and energy sectors rose 0.4% in December and 4.4% for the year, a drop from 4.7% in 1988.

Most economists are expecting a modest improvement in overall inflation this year, but some warn that inflation will be stubborn, largely because the low unemployment rate is keeping wages rising.

Consumer Price Index since 1980. Percent change from prior year. 1980: +12.5. 1986: +1.1. 1989: +4.6.

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