Sales Up; Consumer Prices Steady Economic Reports Encourage Economists, Stock Market
Consumer prices edged up a tiny 0.1 percent in September while retail sales showed modest but broad-based strength despite a big drop in demand for new automobiles.
“For Friday the 13th, these numbers are anything but frightening,” said Jerry Jasinowski, president of the National Association of Manufacturers. “The inflation rate is clearly slowing down, while retail sales are achieving moderate increases.”
The Labor Department reported Friday the 0.1 percent increase in its Consumer Price Index matched the minuscule advances in June and August and fell below the 0.2 percent gain in July.
For the year so far, inflation is growing at a 2.8 percent annual rate, barely above the 2.7 percent recorded in 1994.
The low-inflation report, along with some better-than-expected corporate earnings reports helped boost the stock market. The Dow Jones industrial average gained 28.9 points.
However, Because of the low inflation, the 47 million Social Security and Supplemental Security Income recipients will get a only 2.6 percent cost-of-living benefit increase next year, the second-smallest in 26 years.
Monthly Social Security checks will average $720 in 1996, up from $702 this year, Social Security Commissioner Shirley S. Chater announced.
The low inflation report also strengthened bond prices, which pushed the yield on the government’s 30-year bond down to 20-month lows. That, together with continued strong earnings reports, boosted stocks. But some analysts contend the best inflation news may be over and that, while prices will remain under control in 1996, they may be slightly higher.
“We’re now benefiting from the inventory correction that occurred during the first half of 1995,” said economist Mark M. Zandi of Regional Financial Associates in West Chester, Pa.
“To reduce their stockpiles, retailers had to cut back on prices and offer discounts,” he explained.
“But the inventory correction is about played out and as a result, retailers will be less aggressive in pricing in 1996.”
Still, retailers rang up a second straight month of increased sales in September, the Commerce Department said in a second report Friday. Sales rose 0.3 percent, to a seasonally adjusted $197.5 billion, on top of a 0.5 percent gain in August.
Most sectors shared in the advance. But automobile dealers saw sales fall 1 percent after jumping 2.8 percent in August, when many were discounting prices to clear showrooms and backlots to make room for 1996 models.
Excluding autos, sales were up 0.7 percent. Department store sales were up 1 percent and purchases at apparel shops rose 1.7, both reversing steep declines a month earlier.
Reflecting the rebound in housing, sales of building materials and furniture both gained 0.8 percent. Grocery store sales rose 0.7 percent. Service stations pumped 0.9 percent more gasoline.
Gasoline, on the other hand, helped keep inflation under control last month. Prices fell 1.6 percent, bringing the total decline over the last three months to 6.5 percent. The reduction contributed to a sharp 1.4 percent decline in the CPI’s energy component, the third straight monthly drop.
Food prices, however, continued to increase, up 0.1 percent for the sixth straight month. But analysts said the latest advance was due in part to the summer drought, which caused shortages of vegetables and other produce.
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