September 14, 1995 in Nation/World

Consumer Prices Edge Up 0.1 Percent Sharp Decline In Cost Of Gasoline, Airfares Helps To Keep Inflation In Check

Associated Press

Big declines in the cost of gasoline and airline tickets held consumer price inflation to a tiny 0.1 percent last month while the economy showed fresh signs of perking up.

The good news on inflation, disclosed in the Labor Department’s Consumer Price report, came Wednesday as the Federal Reserve released its latest national survey of economic conditions.

The Fed survey, compiled from reports from the Fed’s 12 regional banks, said construction activity was strengthening in many parts of the country. The Chicago and St. Louis districts noted strong home sales and Cleveland, Atlanta and San Francisco reported a rebound in non-residential construction.

The central bank also noted that a steep slide in manufacturing appeared to be bottoming out and it blamed reports of weakness in retail sales and farming on temporary weather factors.

Many analysts said the Fed’s economic survey, which will be used by policy-makers when they meet Sept. 26, would persuade the Fed to leave interest rates unchanged.

“Fed officials have the economy right about where they want it,” said David Wyss, chief financial economist at DRI-McGraw Hill Inc. in Lexington, Mass. “Why would they want to loosen when the economy is doing perfectly well right now?”

In August, energy prices fell by 0.8 percent. Gasoline pump prices plunged 2.9 percent, the biggest decrease since March 1991.

Airline fares also took a big drop for the month, falling 3.5 percent. It was the second large monthly decline in fares following a steep runup in prices that still left them rising at an annual rate of 22.7 percent this year.

Food prices were up 0.2 percent in August with declines in dairy products, fruit and vegetable prices offsetting increases for pork, poultry and fish.

Excluding the volatile food and energy sectors, prices were up 0.2 percent.

New-car prices were up just 0.1 percent, reflecting the aggressive discounting dealers used to clear out unsold inventory in August. Clothing prices, which have been falling for much of the year, posted a 0.3 percent increase in August.

Medical costs rose 0.4 percent in August and were up 4.4 percent over the past 12 months, the fastest pace for any of the major categories.

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