Consumer prices up 0.3 percent in September
Thursday, October 16th 2003, 12:00 am
By: News On 6
WASHINGTON (AP) _ Consumer prices rose by a modest 0.3 percent in September for the second month in a row, mostly reflecting higher gasoline prices that put a dent in motorists' wallets. At the same time, production at the nation's factories, mines and utilities rebounded.
The Labor Department's latest reading Thursday on the Consumer Price Index, the government's most closely watched inflation barometer, was slightly stronger than the 0.2 percent rise that economists were forecasting and should ease somewhat Federal Reserve policy-makers' concerns about deflation, an economically dangerous and widespread weakness in prices.
Separately, the Federal Reserve reported that industrial production rose by a solid 0.4 percent in September, a turnaround from the disappointing 0.1 percent dip registered in the previous month. The performance in September matched economists' forecasts.
At factories, output jumped by 0.7 percent in September led by an increase in automobile production; production at mines was flat and output as gas and electric utilities dropped by 2.2 percent.
Excluding energy and food prices, which tend to swing widely from month to month, ``core'' consumer prices edged up by just 0.1 percent in September for the second consecutive month, matching economists' expectations. That showing on the core inflation rate suggested that most other prices are moderate.
In a second report from the department, new claims for unemployment insurance dropped for the second week in a row, offering a hopeful sign that the pace of layoffs is slowing as companies feel more confident that the economic rebound won't fizzle out.
For the work week ending Oct. 11, new applications for jobless benefits dipped by a seasonally adjusted 4,000 to 384,000, the lowest level since early February and a better performance than analysts were predicting. The week before claims fell by 17,000.
The trio of economic reports depicted an economy that is perking up and for the most part is enjoying a stable price climate.
In still another report, the Social Security Administration announced that beneficiaries of the program will get a 2.1 percent cost-of-living increase next year, providing an extra $19 a month for the typical retiree.
Next year's boost is up from this year's increase of 1.4 percent, but continues to reflect an economy with inflation at a low ebb.
In the overall inflation report, even with the recent increases in the CPI, Federal Reserve policy-makers have expressed more concern about inflation going down, rather than up.
``The risk of inflation becoming undesirably low remains the predominant concern for the foreseeable future,'' Fed Chairman Alan Greenspan and his colleagues said at their last meeting on Sept. 16. That's because a widespread price decline would severely hurt the economy and is hard to stop once its takes hold.
The current climate of generally low levels of inflation gives the Fed the leeway to keep its main short-term interest rate at a 45-year low of 1 percent at its next meeting on Oct. 28, economists say.
With the economy gaining traction, however, deflation fears should ease, economists say.
For the 12 months ending September, consumer prices rose by 2.3 percent, compared with a 2.4 percent rise for all of last year. Core prices, excluding energy and food costs, meanwhile, went up by just 1.2 percent, the smallest increase since 1966, and down from a 1.9 percent advance for all of 2002.
The weakness in core prices is a byproduct of a lackluster economic climate seen last year and earlier this year. That climate had made it difficult for some companies to raise prices. That's a benefit for consumers, but can squeeze producers' profit margins.
In September, lodging prices dropped by 0.3 percent, new car prices dipped by 0.4 percent and airline fares declined by 1.8 percent.
Those and other price declines, however, were offset by rising prices for other goods and services.
Energy prices rose by 3 percent in September led by a 6.3 percent jump in gasoline prices. More recently gasoline prices have been retreating as supplies have grown and the busy summer driving season has come to an end.
Food prices nudged up by 0.2 percent last month. Higher prices for beef and veal, pork, dairy and vegetables swamped lower prices for fruit.
Clothing prices went up 0.5 percent in September, reflecting prices increases associated with the introduction of fall and winter wear.
Medical care prices rose 0.5 percent and college tuition and fees went up 0.7 percent, continued sore spots for consumers.
In other economic news, businesses cut inventories by 0.4 percent in August and sales dropped by 0.2 percent, a sign that companies haven't totally let go of their wariness about the economy's direction.