Inflation Rate Held at 0.2% by Food, Fuel : Orders for Durable Goods Hint Economy May Be Rebounding

Continued moderation in food and fuel costs held the June inflation rate to 0.2% at the retail level, the government reported today.

(In the Los Angeles area, consumer prices rose just 0.1% after jumping a full 1% in May.)

Grocery prices nationwide fell for the fourth straight month, but food and beverage prices overall edged up 0.1%, mostly because of a 0.6% increase in the price of restaurant meals. Prices for food eaten in the home declined 0.2%.

Gasoline prices rose 0.2%, despite the slackness in world crude oil prices. Transportation costs overall, however, were down 0.1%, largely because of a 1.6% decline in used-car prices.

Gasoline Prices Rise

Analysts have noted that gasoline prices have been rising slightly in the face of falling oil prices, a phenomenon the experts attribute largely to aggressive price increases following the government’s July 1 tightening of allowable lead levels in leaded gasoline.

Meanwhile, the government also reported today that orders for durable manufactured goods rose a moderate 1.8% in June, a signal that the economy may at last be rebounding somewhat from its prolonged sluggish growth.

The Commerce Department said the June increase in orders for durable goods, items expected to last at least three years, followed an even larger 3.3% May gain. In both months, a large part of the improvement came from an increase in orders for military equipment, reflecting the government’s huge defense buildup.

Inflation ‘Under Control’

In all, the Labor Department’s consumer price index report for June was a reaffirmation of analysts’ longstanding assessment that inflation is unlikely to be any more of a problem this year than last, when prices rose 4%.

At the White House, presidential spokesman Larry Speakes said that today’s two reports “show that inflation is still under control. All economic indicators are still pointing to very strong third and fourth quarters.”

For the first six months of 1985, prices have risen at a moderate 3.7% annual rate.

The year opened with monthly price increases of 0.2% and 0.3% in January and February before jumping 0.5% in March and 0.4% in April. But the huge advances in fuel prices that produced those large increases evaporated, as predicted, and the May increase was a more typical 0.2%.