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May 1984, Vol. 107, No. 5
Inflation remained low in 1983
in face of strong recovery
Inflation in both retail and primary markets was unusually low in 1983, particularly in light of the sharp price increases recorded in most other recent years.
The 3.8-percent increase in the Consumer Price Index for All Urban Consumers (CPI-U) for 1983 compares with a 3.9-percent rise in 1982 and was the smallest December-to-December increase since the 3.4-percent rise in 1972, when price controls were in effect. Although the overall increase in 1983 was virtually the same as in 1982, the major components behaved somewhat differently as the economy recovered from the 1981-82 recession.1 Larger, although still moderate, advances in the transportation and the apparel and upkeep categories offset smaller increases in all major categories of consumer spending. (See table 1.)
In 1983, the Producer Price Index (PPI) for Finished Goods moved up 0.6 percent, after climbing 3.7 percent the year before and 7.1 percent in 1981. The 1983 rise was the smallest for any year since the 0.5-percent increase between December 1963 and December 1964. The consumer foods index increased 2.2 percent in 1983, virtually the same as in the preceding year. The finished energy goods index dropped 9.0 percent over the year, after showing almost no change in 1982. After advancing 5.3 percent in 1982, prices for finished consumer goods other than foods and energy moved up 1.8 percent in 1983. Capital equipment prices rose 2.0 percent, about half as much as in 1982.
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1 Data for 1983 are not strictly comparable with previous years, however, because of a technical change in the treatment of homeownership. Through December 1982, the CPI-U used an asset approach to measure shelter costs of homeowners. A flow-of-services approach for that component called "rental equivalence" was introduced in January 1983. This change not only affected the manner in which homeowners' costs were measured, but also affected the relative weighting structure. See Robert F. Gillingham and Walter Lane, "Changing the treatment of homeownership in the CPI," Monthly Labor Review, June 1983, and "Changing the homeownership component of the Consumer Price Index to rental equivalence," CPI Detailed Report, January 1983.
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