Thursday, June 15, 2000

Inflation bump less than feared

But gas costs up since study done

By Jeannine Aversa
The Associated Press

        WASHINGTON — Consumer inflation edged up a smaller-than-expected 0.1 percent in May as lower costs for gasoline helped blunt the biggest jump in food prices in more than 18 months.

        Still, a new survey by the Federal Reserve found scattered signs of “worsening price inflation.”

        The tiny advance in the Consumer Price Index, the most closely watched inflation gauge, came after consumer prices showed no change in April, the Labor Department said Wednesday.

        Economists believed that the report based on surveys taken early in the month did not capture energy price increases, particularly for gasoline, that came later in May. As a result, June's CPI report is likely to show large jumps in gasoline and other energy prices, analysts said.

        Outside of the volatile energy and food categories, the “core” rate of inflation rose for the second month in a row by 0.2 percent in May, matching many analysts' expectations.

        In its survey, the Fed said “indications of worsening price inflation, while not widespread, (were) reported by several districts.” The survey cited higher raw material prices for such things as petroleum-based products, natural gas, metals, paper and some construction materials.

        The survey also said that while the economy grew solidly in April and May, there were “signs of some slowing from the rapid pace earlier in the year.”

        While employers are continuing to report shortages of workers and having difficulty hiring and recruiting people, the Fed said that such labor market tightness has not intensified.

        Also, retailers in Boston, New York, Atlanta, Chicago, Kansas City and San Francisco said wage inflation had not shown up in higher product prices.

        The survey, compiled from reports from its 12 regional banks, will be used when Fed policy-makers meet June 27-28 to review their stance on interest rates. The report was based on information collected before June 6.

        Since last June, the central bank has raised interest rates six times to slow the speeding economy and keep inflation under control.

        Some recent economic reports also have suggested the economy is slowing. While economists have offered mixed opinions on whether the Fed will push up rates again later this month, a growing number believe the odds are greater that the Fed will stay on the sidelines. They cited the CPI report as bolstering their case.

        On Wall Street, the Dow Jones was up 53 points, but the Nasdaq lost 40 in afternoon trading.


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