Consumer Prices Up 0.3% in September

U.S. consumer prices rose 0.3% in September, in line with expectations, as steady energy costs offset higher prices for food, clothing and new cars, according to government figures released Wednesday.

The finding--along with a tame report last week on September producer prices--bolsters the case for the Federal Reserve Board refraining from raising interest rates at its next policy meeting Nov. 13, analysts said.

“With core inflation at 2.7% over the last 12 months, there is nothing to prompt the Fed to move in November,” said John Ryding, an analyst at Bear Stearns Cos. in New York.

Even so, government bonds, which were little changed after the CPI report, fell after a separate report from the Labor Department rekindled concerns about labor costs. Americans’ weekly earnings, adjusted for inflation, increased 0.8% in September after rising a revised 1.2% during August. Previously, the government said August earnings had risen 0.7%.

Though real average weekly earnings are up only 1.4% in the last 12 months, many economists remain concerned about the potential for accelerating inflation stemming from a low unemployment rate, worker shortages and rising wages. Labor costs account for about two-thirds of consumer prices.

“We really don’t know if there’s a problem,” said Oscar Gonzalez, an economist at John Hancock Financial Services in Boston. “That’s the Fed’s dilemma.”

During August, the U.S. consumer price index increased 0.1%, restrained by the largest decline in clothing prices in almost half a century, government analysts said.

The CPI’s core rate, which excludes food and energy costs, also increased 0.3% in September after rising by 0.1% a month earlier.

Several one-time events accounted for September’s CPI increase, namely new car prices, higher air fares and a rebound in clothing costs, said Bruce Steinberg and Cheryl Katz, economists at Merrill Lynch & Co. in New York. “Underlying inflation fundamentals remain healthy, and we continue to believe that inflation will remain under 3% not only for 1996, but also for 1997,” they said in a report.

During September, energy costs, which account for 7% of the CPI, were unchanged from a month earlier after falling in June, July and August, Labor Department statistics show.

That means crude oil prices, which rose from below $20 a barrel to above $25 a barrel in recent weeks after the latest military clash between U.S. and Iraqi forces, haven’t yet begun to sting American consumers.

Food prices, which make up 16% of the CPI, increased 0.5% in September. Clothing and upkeep and transportation costs also climbed 0.5%. The rise in transportation costs reflected the largest increase in auto prices since January 1991 and the reinstatement late in August of a federal tax on airline tickets.

Housing and medical care costs increased 0.2%. Entertainment costs rose 0.1%.

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Consumer Prices

Percentage change, month to month, seasonally adjusted:

Sept. 1996: +0.3%

Source: Bureau of Labor Statistics