Inflation, as measured by consumer prices, is continuing at a low rate, the Labor Department said Friday as it reported a 0.3% increase in February and a modest 3.3% annual rate for the first two months of the year.
The consumer price index report was in line with the record of tamed inflation that now stretches back more than two years. Economists called the latest report unremarkable except for the fact that it contrasted sharply with another measurement, reported earlier this week, that placed inflation at a much higher 5.4% annual rate.
"The deflator is an aberration," said Robert Wescott of Wharton Econometrics, an economics consulting firm in Philadelphia, in a reference to the complex "implicit price deflator" reported by the Commerce Department on Thursday. That measurement indicated an unexpectedly high inflation rate along with an unexpectedly low 2.1% growth rate for the nation's economy during the first three months of the year.
"The deflator is a technical measure that does strange things," added Christopher Caton of Data Resources Inc. of Lexington, Mass. "That's the one that's wrong, and the CPI is right."
In a parallel report Friday, the Commerce Department said new orders for non-defense capital goods, which dropped sharply by 13.1% in January, rebounded by 29.6% in February. This statistical category, a key indicator of the manufacturing sector of the economy, had been sluggish for many months.
But a sharp 48.5% drop in the smaller and very volatile category of new orders for defense goods pulled the February statistic for all new orders--defense and non-defense--down by 0.2%.
Because imports from abroad accelerated as the dollar soared in value in February, shipments of manufactured goods dropped 0.9%.
On balance, the inflation and durable-goods reports were very much in line with the expectations of many economists.
"The economy is moving sideways," Caton said. "Real growth is about 3%; inflation is about 4%. And unemployment will stay at about 7%."
"These are really quite positive numbers," Donald H. Straszheim of Merrill Lynch said of both reports Friday. "We don't see any inflation run-up any time in the next two years, and people have overstated the decline in industrial production. We think that after people look below the surface of the GNP report (Thursday's Commerce Department projection of only 2.1% growth so far this year), they won't regard it as all that disturbing."
At the White House, presidential spokesman Larry Speakes seized on the small increase in the consumer price index as further evidence that "inflation at the consumer level remains well contained."
The Labor Department also reported that consumer prices for the Los Angeles-Long Beach-Anaheim metropolitan area increased 0.4%, a figure that, unlike the nationwide measure, was not seasonally adjusted. The national average for all cities, unadjusted, also was 0.4%.
Such increases as did occur in the consumer inflation index in February were caused by prices for clothing, up 1%, and for fruits and fresh vegetables, up 0.6%.
But the Labor Department attributed the former to an earlier-than-usual end of post-Christmas department store sales and the latter to the lingering effects of January's cold weather.
Energy prices continued on the sharply downward path of recent years, with gasoline down 2.6% for the month, heating oil down 1.5% and natural gas down 0.5%. Gasoline prices are now 17.3% below the peak reached in March, 1981, and fuel oil is 16.6% under its April, 1981, high.
More important than those often volatile commodity prices, analysts pointed out, is the fact that the basic forces that drive inflation in an economy now seem totally under control.
Straszheim and Wescott both noted the continuing low rate of wage increases, now running about 4% annually, and both concluded that even a sharp short-term drop in the strong dollar would not revive the high inflation of the late 1970s.