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December, 1987, Vol.
110, No.
12
Inflation fueled by oil prices in
first 9 months of 1987
Inflation, as measured by the Consumer Price Index for All Urban consumers (CPI-U), increased at a seasonally adjusted annual rate of 4.8 percent during the first 9 months of 1987. This increase, although slowing considerably between the first and third quarters, was notably larger than the 1.1-percent rise in 1986 and the advances of about 4 percent in each of the 4 preceding years.
The marked turnaround in energy prices—up at an annual rate of 12.6 percent in the first 9 months of this year after declining 19.7 percent in 1986—was the primary factor in the larger increase in the overall index. However, the rate of the advance of energy prices decelerated sharply quarter by quarter in 1987, from an annual rate of 26.1 percent to 7.9 percent and, finally, to 5.0 percent in the third quarter.
The CPI excluding energy also rose at a more rapid pace in the first 9 months of 1987. Although the pace moderated between the first and third quarters, this slowdown was not as pronounced as that for energy. Prices for nonfood-nonenergy commodities picked up quite rapidly, with the largest advances posted for clothing and used cars. During the first 9 months of 1987, the indexes for food and shelter each advanced at about the same rates as in the preceding year. Charges for other services, however, slowed over the same period. The annual rates of price change for these groups and their relative impact on the All-Items index during the last several years and the first 9 months of 1987 are shown in table 1.
This excerpt is from an article published in the December 1987 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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