Prices Take Biggest Jump in Over a Year
Powered by a surge in gasoline prices, inflation rose 0.5% last month, the Labor Department reported Tuesday, marking the biggest increase in the consumer price index in more than a year.
Analysts quickly dismissed the jump as a one-time aberration and predicted that inflation would remain low. The increase “doesn’t worry me,” declared Robert Gough of Data Resources Inc., a Lexington, Mass., economic forecasting firm.
But, in a separate report that appeared far more disturbing, the Commerce Department said that factory orders for durable goods--a key indicator of strength in U.S. manufacturing industries--fell 2.3% in March, the third such decrease in four months. And that report seemed to underline the belief held by many observers that the economy stands in more danger of a slowdown than of a reignition of inflation.
In part reflecting that view, White House spokesman Larry Speakes said that “inflation still appears to be well under control” but added that “prompt, decisive action by Congress in reducing federal spending is essential if we are to maintain the expansion of the U.S. economy.”
4.7% Inflation in L.A.
March’s price increase translates to a 5.8% annual rate of inflation, the Labor Department said. During the first quarter of this year, national consumer prices increased at a seasonally adjusted annual rate of 4.1%, and the inflation rate for the 12 months ending in March was only 3.7%. In the Los Angeles-Long Beach-Anaheim metropolitan area, inflation was 4.7% over the 12-month period, but the unadjusted increase for last month was a modest 0.2%.
Last month, gasoline prices soared 3.6% after sharp declines in January and February of 2.5% and 1.4%, the Labor Department reported. But, despite the March surge, gasoline prices still are slightly lower than they had been at the end of December--and they are 14.1% below their peak level of March, 1981.
“Even though energy prices were up, I think it was an aberration, showing the switch from one kind of refining to another,” Gough said. “But the (decline in) durable goods orders bothers me. That was disappointing.”
Similarly, Allen Sinai, chief economist for Shearson Lehman Bros., attributed March’s “temporary increase in inflation”--the largest since January, 1984--to the growing demand for higher-priced unleaded gasoline as more and more Americans drive newer cars. And he, too, expressed concern over “continued pressure on the U.S. manufacturing industry” from competition by imported products.
Once gasoline prices level off this spring, John M. Albertine, president of the American Business Conference, said, the consumer price index should “resume its stodgy pace.”
Other key components of the index increased at far more modest rates, the Labor Department reported: Home heating oil and natural gas each were up 0.6% and food prices remained steady, with rising fish and egg prices offset by declines in meat, fruit and vegetables. Housing increased a modest 0.3%, apparel was up 0.5% and medical care grew by 0.8%. New car prices rose 0.5%, a lower rate of increase than in the last two months.
No Inflationary Pressures
These moderate figures led Sinai to state: “The underlying factors do not suggest any cause for concern. There is a total absence of demand-pull inflationary pressures in the economy.”
But, against that background, the reported decline in durable goods orders emphasized the impact of a slowing economy on prices. And, behind that statistic was the more ominous fact that non-defense capital goods orders declined 6.9%--more than offsetting an increase of 24% in the volatile category of defense goods.
“Non-defense capital goods is the one to watch,” Gough said, noting that that measure has been weak since last April. “It is an indication business is convinced that the economy is slowing.”
