Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, February 13, 1993 TAG: 9302130062
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
GROWTH, BUT NOT INFLATION
A fresh batch of encouraging reports Friday suggested the economy is improving modestly without reigniting inflation.The government said that wholesale prices remained under control in January and that business sales had jumped sharply a month earlier.
"The expansion is solidly in place, it's just going to remain quite moderate," contended economist Cynthia Latta of DRI-McGraw-Hill, a Lexington, Mass., forecasting service.
"We're moving in the right direction," agreed Ron Schriebman, vice president of the National Association of Wholesaler-Distributors. "We just need to pedal faster and create some more jobs."
The Labor Department said its Producer Price Index edged up 0.2 percent in January following a 0.1 percent advance a month earlier and 0.1 percent declines in October and November. The index measures inflation at the wholesale level, one step from its impact on consumers. The consumer inflation report for January is scheduled for release next Thursday.
But the report showed that much of the increase was in energy products and automobiles. Food prices were down. At an annual rate, wholesale inflation was running at 2 percent, just slightly more than the 1.6 percent in 1992.
At the same time, the Commerce Department said business sales shot up 1.9 percent in December, outpacing the 0.4 percent buildup in inventories, including a 1.7 percent jump in retail stockpiles.
Analysts were unable to explain the surge in the retail backlog, which occurred at the same stores that boasted a 0.8 percent increase in sales during the strongest holiday shopping season in four years.
Still, the overall inventories-to-sales ratio fell to 1.46, the lowest level in at least 10 years. Slim inventories often mean increased production and more jobs as businesses try to meet increased demand as the economy picks up.
In the wholesale price report, the Labor Department said food prices dropped 0.9 percent in January after jumping 1.3 percent a month earlier. Vegetable prices, which shot up 48.4 percent in December, fell back 19.2 percent last month.
Energy prices, on the other hand, rose 0.9 percent, including a 2.9 percent boost in gasoline prices. The cost of energy products had fallen 2.3 percent in December.
Excluding the often-volatile food and energy components, the core rate of wholesale inflation rose 0.4 percent, partly because of what analysts said were one-time increases of 1.2 percent in automobile prices and 2.6 percent in tobacco products.
Schriebman said the report showed that wholesale inflation began 1993 where it left off last year.
"There's no volatility in producer prices and hasn't been for two years now," he said. "There's just too much slack in the economy, too much idle capacity, to rile up inflationary pressures."