Overall CPI Declines for 1st Time Since ’86
World oil prices may be on the rise again, but prices paid last month by consumers for gasoline, home heating oil, natural gas and electricity all declined enough to cause the consumer price index to fall slightly for the first monthly decline since 1986, the Labor Department reported Friday.
Combined, the energy items in the CPI fell 2.9%, with gasoline down the most--6%. That was enough to push the overall index down by 0.1%.
But since the department’s price checkers hit the nation’s gasoline stations in August, the average pump price for all grades has jumped about a dime to $1.60 in the week ended Monday, putting it back roughly to where it was in June, according to the Energy Information Administration.
Even with last month’s decline, energy prices remained 13.1% higher than they were a year earlier. That contributed to an overall 3.4% increase in consumer prices over the last 12 months.
Excluding both energy and food items, the so-called core CPI rose 0.2% for the fifth month in a row and 2.5% in the past year. Actually, some items included in the core, such as airline fares, have been rising rapidly in response to higher oil prices. For instance, public transportation costs are now 9.4% higher than they were a year ago.
“We believe that core inflation has peaked,” said Bruce Steinberg, chief economist at Merrill Lynch & Co. in New York. “With the economy slowing, core inflation should move lower in coming months.”
Two other reports out Friday added to the growing body of evidence pointing to such a slowing of economic growth.
The Federal Reserve said industrial production--the output of the nation’s factories, mines and utilities--increased 0.3% last month, almost entirely because utility output rebounded on a seasonally adjusted basis after an unusually cool summer in much of the country. Manufacturing production rose only 0.1% for the second month in a row.
A third report, from the Commerce Department, indicated that businesses’ stocks of unsold goods rose only 0.2% in July after much stronger gains in May and June.
Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, N.Y., said, “This was the smallest rise in inventories since January 1999, which might mean that the trend in the pace of stock-building is slowing. If so, inventories could turn out to be a major drag on third-quarter growth.”
However, Shepherdson cautioned not to read too much into a single month’s figure, which “may represent no more than a pause.” But some other forecasters were already predicting that the rate of inventory stockpiling would slow in the July-September period and hold economic growth well below a 3% rate, down significantly from the extraordinarily strong pace of the previous 12 months.
In addition to energy prices, costs for a catch-all category of “other goods and services” fell 0.3% because of a 1.6% drop in prices of tobacco and smoking products. Tobacco product prices went up 3.1% in July and are up 12.6% over the last year.
As for some other major components of the index, prices for food and beverages, apparel and education and communication rose 0.2% last month. Shelter costs increased 0.3% and medical care 0.4%.
New motor-vehicle prices continued to show virtually no change. They fell 0.2% last month, which left them only 0.4% higher than they were in August 1999. Public transportation costs rose 0.9% last month and were up 9.4% over the past year.
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Consumer Price Index
Monthly percentage change, seasonally adjusted:
August: --0.1%
Source: Bureau of Labor Statistics
