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May 1990, Vol. 113, No. 5
The 1989 price increase largest in eight years
Robert A. Kuemmerling and Craig Howell
Increases in the Consumer Price Index for All Urban Consumers and the Producer Price Index for Finished Goods were marginally larger in 1989 than in 1988, reflecting an acceleration of energy prices. The sharp advances in energy and food prices that occurred during the first 5 months of the year, however, were not sustained during the remaining months of 1989. Nevertheless, the 1989 advances in the CPI and PPI were the largest annual changes since 1981.
For the 12-month period ended December 1989, the CPI rose 4.6 percent. This compares with increases of 4.4 percent in both 1987 and 1988 and was the largest annual change since an 8.9-percent rise in 1981. While advances in the food, shelter, and energy components were each larger than in 1988, the slight acceleration in the CPI was principally because of the sharp increases in petroleum-based energy items during the first half of 1989. Food prices rose notably more in the first half, registering their largest increase since 1980. The index for all items except food, shelter, and energy up 4.1 percent in and 1989 rose less than in 1988, as prices of other commodities registered their smallest increase in 3 years. In particular, apparel prices increased only 0.7 percent in 1989, after rising 4.8 percent in 1988. Prices for other services moved up about the same as in 1988. An 8.4-percent increase in medical care services accounted for about one-third of the rise. The rates for these groups during the past 10 years are shown in table 1.
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