The economy in September had the best of both worlds--moderate growth and low inflation--according to government reports Friday that showed consumer prices and retail sales inching ahead at a moderate pace.
The Labor Department reported the consumer price index rose 0.1% in September, the same benign rate as in August.
The Commerce Department said retail sales inched up 0.3%, after a moderate 0.5% climb in August, showing consumer spending is moving ahead at a moderate pace.
"For Friday the 13th, these numbers are anything but frightening," said Jerry Jasinowski, president of the National Assn. of Manufacturers. "The inflation rate is clearly slowing down, while retail sales are achieving moderate increases."
"This is the Federal Reserve [Board's] finest hour," said Robert G. Dederick, economic consultant for the Northern Trust Co. in Chicago.
"It managed to slow the expansion before inflation emerged, but not slow it so much that a recession emerged."
Economists said they expect the economy to stay on the same course for the rest of the year.
"I don't think we're going to see much change in the economic landscape at all through the end of the year," said Ward McCarthy, managing director of Stone & McCarthy Research Associates Inc.
The reports were expected to give Fed policy-makers something to smile about, because the central bank's main goal is to keep a lid on inflationary pressures while aiming for modest economic growth.
"For years [Fed Chairman Alan] Greenspan has articulated a belief that if you can keep inflation under control . . . you can expect a prolonged period of steady economic growth," McCarthy said. "Right now it looks like he's done just that."
Several economists expect the Fed to lower interest rates before year-end, but say the timing of such a move would depend on when Congress resolves budget issues.
The closely watched "core" CPI rate, which excludes volatile food and energy prices, rose 0.2% for the fifth consecutive month.
The CPI has risen at a 2.8% annualized rate so far this year. The index rose 2.7% in all of 1994.
"The inflation pressures in the economy remain moderate and consumer spending remains moderate," said Darwin Beck, money market economist at CS First Boston.
Prices during the month were constrained by a 1.4% drop in energy prices, which more than offset an 0.5% rise in food prices.
Gasoline prices fell 1.6%, natural gas fell 0.3%, electricity declined 1.9% and fuel oil fell 0.7%.
Friday's data is "consistent with economic growth around 2% in the third quarter, and are likely to continue in the fourth quarter as well," Beck said.
Retail sales rose as a broad-based business rebound was restrained by weaker auto sales, the Commerce Department said.
Retailers and car dealers rang up a seasonally adjusted $197.5 billion last month after sales rose a revised 0.5% in August, the department said.
August was previously reported as a 0.6% increase.
Excluding autos, sales rose by 0.7% in September after declining 0.3% in August. The August figure was revised downward from unchanged.
The downward revisions to August dampened the gains in September, economists said.
"Retail sales were a bit stronger on the ex-auto component, but if you look at the revisions [to August], it takes away some of the strength that we saw in September," said Marilyn Schaja, money markets economist at Donaldson, Lufkin & Jenrette Securities Corp.
Sales of new cars fell 1% last month to $48.4 billion after a 2.8% rise in August.
The figures include not only sales to individuals but also sales to fleet buyers such as auto rental companies.
New cars account for close to a quarter of total retail sales, so swings in demand strongly affect the overall figure.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Percentage change, month to month, seasonally adjusted:
Sept. 1995: 0.1%
Source: Bureau of Labor Statistics