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July 1982, Vol. 105, No. 7
Inflation continues to abate
during the first quarter
Craig Howell, David Callahan, and Mary Burns
After slowing substantially in 1981, inflation continued to decelerate in both the retail and primary markets during the first quarter of 1982. The Consumer Price Index for All Urban Consumer (CPI-U) advanced at a seasonally adjusted annual rate of increase of 1.0 percent, the lowest quarterly rise since 1965.1 (See table 1.) The recession and a continued abundance of oil were among the principal influences pushing inflation down. The housing and auto industries, particularly hard hit by slumping demand, showed significant price decreases. Retail gasoline prices fell at a record rate, as supplies remained high.
One measure of the underlying rate of inflationthe CPI for all items less food, energy, and mortgage interest costsincreased at an annual rate of 5.7 percent in the first quarter. This was slightly more than in the preceding 3 months but was somewhat slower than the 8.0-percent rise in 1981. Replacing the present homeownership component with the future rental equivalence measure (CPI-U-X1), 2 the index would have advanced at a rate of 2.7 percent, compared with 8.5 percent in 1981.
At the primary market level, the Producer Price Index (PPI) for Finished Goods edged up at a seasonally adjusted annual rate of 0.6 percent, the slowest quarterly advance for this index since it dipped during the first quarter of 1976. The finished energy goods index fell at a rate of 18.5 percent, a drop approached only by a 14.2-percent rate of decline in the first quarter of 1976. Price increases for capital equipment and for finished consumer goods other than foods and energy both slowed to rates below 4 percent, considerably less than in other recent quarters. The index for finished consumer foods moved up moderately. Prices for intermediate goods declined slightly in the first 3 months of 1982, the first decrease since the second quarter of 1975. Because of higher raw foodstuff prices, the crude materials index rose at a rate of 1.0 percent, following sharp declines in the third and fourth quarters of 1981.
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1 For a report on the CPI in relation to the PCE Deflator, see Julie A. Bunn and Jack E. Triplett, "Reconciling the CPI and the PCE Deflator: first quarter 1982," pp. 37-38.
2 For details on changing the homeownership component, see Robert Gillingham and Walter Lane, "Changing the treatment of shelter costs for homeowners in the CPI," Monthly Labor Review, June 1981, pp. 9-14.
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