Growth Rate Slows Down in Consumer Prices, 1993
Lamb, Eddie, Monthly Labor Review
Although food prices rose slightly above the overall rate of inflation, price declines in petroleum-based energy, tobacco and smoking products, and moderate costs for medical care were among the major causes of low inflation in 1993
The Consumer Price Index for all Urban Consumers (CPI-U) rose 2.7 percent in 1993, its smallest annual rise since a 1.1-percent rise in 1986, and the second lowest rate since 1965.(1) (See chart 1.) During the past 3 years, changes in energy costs have helped to hold down the overall rate of inflation. While prices for energy moved up slightly in 1992, energy prices in both 1991 and 1993 declined. Prices declined for tobacco and smoking products and moderated for medical care, contributing to the general slowing of consumer price increases in 1993. The rates of change for selected categories of expenditures over the past 10 years are shown in table 1.
The economy generally improved as 1993 progressed. The Nation's gross domestic product (GDP) rose at a faster rate each quarter; the 2.9-percent increase in GDP for 1993 as a whole was its best showing in 5 years. The unemployment rate, which was 7.3 percent in December 1992, fell to 6.4 percent in December 1993. The number of payroll jobs rose by about 2 million in 1993, as measured by the survey of establishments.
While output and employment grew in 1993, there was little evidence of increasing inflationary pressures. Total labor compensation costs paid by U.S. nonfarm business employers (which include wages, salaries, and benefits paid to their employees) increased 2.8 percent in 1993, after advancing 5.2 percent in 1992. Also, productivity was up 1.9 percent over the past year, offsetting part of the rise in compensation. As a result, labor costs per unit of output rose only 0.9 percent from the fourth quarter of 1992 to the fourth quarter of 1993. In 1993, the Producer Price Index moved up only 1.0 percent for intermediate materials, supplies, and components and 1.9 percent for capital equipment. In addition, long-term interest rates remained relatively low, keeping the cost of financing capital equipment purchases moderate.
During the past 3 years, generally falling prices for energy have helped to hold down the overall rate of inflation. In 1993, energy costs fell 1.4 percent, after increasing 2.0 percent in 1992 and dropping 7.4 percent in 1991. Prior to the 1993 and 1991 decreases, the last time that energy costs declined was in 1986 (by 19.7 percent), when world oil prices collapsed. The 1993 decline in energy costs was attributable to a drop in the prices of petroleum-based energy commodities. Prices for energy commodities declined 5.1 percent in 1993 after moving up 1.2 percent in 1992. Despite the Federal gasoline tax increase of 4.3 cents a gallon in October 1993, gasoline prices dropped 5.9 percent in 1993. Gasoline prices had increased 2.0 percent in 1992 after dropping 16.2 percent in 1991. The decline in gasoline prices in 1993 reflects a drop in the cost of crude oil in world markets, as the Organization of Petroleum Exporting Countries (OPEC) was unsuccessful in enforcing strict production levels.
Prices for food, which rose substantially less than overall inflation in 1991 and 1992, increased 2.9 percent in 1993, slightly above the overall rate of 2.7 percent. Price increases for fruits and vegetables, along with meats, poultry, and fish accounted for more than half of the increase in food prices in 1993.
Grocery store food (food at home). Prices rose 3.5 percent in 1993, after advancing 1.5 percent in 1992. Prices for fruits and vegetables increased 6.6 percent in 1993, following a 2.2-percent rise in 1992. Fresh fruit prices rose 13.0 percent in 1993, reflecting increases in prices for apples and oranges. Fresh vegetable prices moved up 5.3 percent in 1993, reflecting higher prices for potatoes. …