Inflation Slows but Economists See It as Sign of Recession

WASHINGTON — Consumer inflation slowed slightly in October, and the country’s trade deficit narrowed, but economists attributed today’s seemingly upbeat developments to the near-certainty that the nation has slid into a recession.

The Labor Department reported that the consumer price index rose 0.6% in October, better than the 0.8% spurts that hit in August and September as oil prices surged after Iraq’s invasion of Kuwait.

In the Los Angeles area, prices climbed 0.7% in October after rising 1% the previous month. For the 12 months ending in October, prices jumped 6.7%--the highest yearlong increase since June, 1982, the government reported.

Nationwide, prices rose a modest 0.3% last month for products not related to energy. Economists said this “core” rate, often seen as a better barometer of inflation, probably stayed relatively low because the economic slump is holding down prices.

“The sliding economy is preventing the oil and energy shock from causing a runaway on inflation,” said Allen Sinai, chief economist at the Boston Co.

Added analyst David Wyss of DRI-McGraw Hill:

“There’s some good news on the inflation side, but bad news on the real side, which is that the real economy is a mess.”

Also today, the Commerce Department reported that the U.S. merchandise trade deficit narrowed 3.3% in September, the first improvement since June. But the value of petroleum imports was at its highest level in nine years because of escalating costs due to the Persian Gulf crisis.

Imports dropped 2.4% to $41.3 billion despite a huge 28.5% jump in petroleum imports. But exports also fell, down 2.2% to $31.8 billion. The deficit is the difference between the two.

In a separate report, the Labor Department said Americans’ average weekly earnings, after adjusting for inflation, plunged 2.1% in October. It was the largest decline since a 2.3% drop in April, 1979. The average weekly wage, before adjusting for inflation, was $349.85.

CONSUMER PRICE INDEX Oct. ‘89: +0.5% Sept. ‘90: +0.8% Oct. ‘90: +0.6%