A Tight Lid Is Being Kept on Inflation : Economy: Prices rise 0.1% in July. Retail sales climb 0.5%, but a report says the economy will remain sluggish.
Consumer prices remained flat in July as the unsteady recovery kept inflation under control, the government reported Thursday, while congressional budget experts warned that economic growth will remain torpid the rest of the year.
The Labor Department said the consumer price index edged up a mere 0.1% in July, with food prices declining and energy price increases moderating. So far this year, inflation is running at an annual rate of 2.9%, compared to 3.1% in 1991.
In a separate report, the Commerce Department said retail sales rose 0.5% in July, following a 0.3% decline the previous month. The June figure, originally reported as a 0.5% jump, was revised downward to reflect sagging auto sales. Business analysts consider retail sales figures an important barometer of economic vigor.
The Labor Department, meanwhile, said that first-time claims for unemployment benefits dipped by 66,000 during the first week of August. The decline followed an increase of 69,000 the previous week, reflecting temporary layoffs at General Motors. The unemployment rate was 7.7% in July, down only slightly from an eight-year high of 7.8% in June.
Taken together, economists said, the statistics suggest that the economy is continuing to recover from the recession that began in mid-1990, but the rate of growth remains anemic.
Donald Ratajczak, a University of Georgia economist, said the “stop-and-go” growth pattern has prevented the economy from accumulating enough strength to sustain a full recovery.
Consumers, wary about the future, “are just not buying unless there’s a deal,” Ratajczak said. “They just don’t have the money in their pockets.”
He noted that caution reigns despite the fact that the gross domestic product--the value of all goods and services produced in the United States--is expected to end the year at a record level.
The Labor Department said the July rise in its consumer price index was the best showing since a similar 0.1% advance in May. Prices rose 0.3% in June. The small advance in consumer prices last month was credited to a moderation in energy prices, which had jumped sharply the month before, and the third decline this year in food prices.
For the first seven months of this year, prices are rising at an annual rate of 2.9%, even better than last year’s 3.1% gain. Analysts said the United States is on its way to the best back-to-back performance on inflation since the mid-1960s.
Even so, the Congressional Budget Office predicted in a mid-year review that the recovery will not pick up steam until next year.
The congressional economists said they expect a lackluster increase of 2.5% for 1992. They said a depressed construction industry and budget cuts by state and local governments are likely to sap the strength of the recovery.
The most recent White House financial forecast similarly projects that economic growth will finish the year at 2.7%.
The congressional analysts expect the recovery to gain momentum next year, with economic growth projected at 3.1% for 1993.
“The economy has not yet embarked on a self-sustaining recovery but appears to be on the verge of one,” said the report, which warned that declines in defense spending and other budget cutbacks could restrain growth.
The current growth rate “will not permit a rapid drop in unemployment, but it is also unlikely to rekindle inflation,” according to the analysis.
Congressional forecasters also signaled that foreign economic developments may help the U.S. economy in the long term, pointing to Canada and Germany as solid trading partners for domestic exporters. White House officials maintain that the newly negotiated free trade agreement between the United States, Mexico and Canada will also help the economy.
Retail sales, which have risen every month this year except March and June, totaled a seasonally adjusted $159 billion for July. Department stores and other general merchandisers announced a 2.3% sales gain, a sharp turnaround in light of a 0.5% drop the preceding month.
Gas stations, clothiers and restaurants also reported marginal increases of 0.2%, 0.8% and 0.9%, respectively.
Consumer Price Index
Percent change from prior month, seasonally adjusted
July, ‘92: +0.1%
June, ‘92: +0.3%
July, ‘91: +0.1%
Source: Labor Department
Retail Sales
Seasonally adjusted, billions of dollars
July, ‘92: $159.5
June, ‘92: $158.7
July, ‘91: 154.8
Source: Commerce Department
