Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, January 16, 1993 TAG: 9301160166
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
INFLATION? WHAT INFLATION?
Inflation dropped in 1992 to its second-lowest level in a quarter-century, the government said Friday in a report analysts attributed to weak consumer demand."Inflation is down for the count," said Allen Sinai, an economist with the Boston Co. "It has been low and likely will stay low."
Bruce Steinberg, an economist with Merrill Lynch Capital Markets in New York, agreed. "Inflation will remain very benign in 1993 and probably beyond," he said.
The Labor Department said a barely discernible 0.1 percent increase in December helped hold the Consumer Price Index for the year to a 2.9 percent advance, the slowest since a 1.1 percent gain in 1986.
The 1992 performance was the second-best, after 1986, since inflation slowed to a 1.9 percent rate in 1965.
The core rate, which excludes the volatile food and energy components, rose just 3.3 percent last year. That was the lowest since a 3 percent increase in 1972, after then-President Nixon clamped price controls on the economy.
The report "means that the inflation genie has been put back into the bottle," said John M. Albertine, head of a Washington economic forecasting firm. "Our problem is sluggish growth, not inflation."
In fact, it was sluggish economic growth in 1992 that contained inflation. Without growing incomes, consumer demand waned and forced companies to keep prices low to attract what business they could.
Energy prices did rise 2 percent in 1992 after falling 7.4 percent a year earlier. But the 1991 decline was caused by a return to normal world oil supplies after the Persian Gulf War. Energy costs had surged 18.1 percent after Iraqi President Saddam Hussein invaded Kuwait in August 1990.
Food prices slowed for the third year, edging up just 1.5 percent after increases of 1.9 percent in 1991 and 5.3 percent in 1990. Including beverages, the food component rose 1.6 percent, compared to a 2.5 percent advance in 1991.
Grocery store prices were up 1.5 percent after advancing 1.3 percent in 1991. But restaurant prices rose just 1.4 percent, the smallest increase since a similar one in 1964. And the 2.9 percent gain in alcoholic beverages was much slower than the 9.9 percent advance in 1991 when the federal excise tax was raised.
Transportation posted a faster increase than last year, largely because of a 3.9 percent jump in gasoline prices. Still, the cost of gasoline fell 0.9 percent in December, when it was 14.8 percent lower than its peak in November 1990.
Housing costs were up 2.6 percent, compared to a 3.4 percent increase in 1991. Although natural gas and electricity prices rose 5.1 and 1.7 percent, respectively, fuel oil costs declined 3.4 percent.
Both rental and homeowner costs rose 3.4 percent. Household furnishing prices edged up 1.7 percent.
Apparel costs slowed to a 1.4 percent increase, down from 3.4 percent a year earlier. Holiday discounting was prevalent in December, when clothing prices fell 0.9 percent.
Medical costs also slowed, from a 7.9 percent increase in 1991 to 6.6 percent last year. Entertainment costs rose 2.8 percent, compared to a 3.9 percent advance in 1991.
Other goods and services advanced 6.5 percent, down from 8 percent a year earlier. Increases for tobacco products and tuition and other school fees rose 8.1 and 8.5 percent, respectively, and accounted for more than three-fourths of the gain.
The various changes left the Consumer Price Index at 141.9 in December, meaning a market basket of goods costing $100 in the base period of 1982-84 would have cost $141.90 last month.