Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, May 14, 1994 TAG: 9405160135
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Consumer prices inched up 0.1 percent in April as the country's underlying inflation rate turned in its best 12-month performance in 28 years, the government said Friday.
The Clinton administration hailed the news as proof that strong economic growth is not making price pressures worse, but financial markets were unimpressed, convinced that the Federal Reserve will still raise interest rates Tuesday.
The better-than-expected April inflation performance reflected falling prices for energy, clothing and fruits and vegetables. These more than offset the steepest one-month jump in medical costs in nearly a year.
"The consumer price report was outstanding, showing broad-based moderation," said Stephen Roach, senior economist at Morgan Stanley & Co. in New York.
The government reported that, excluding volatile energy and food costs, prices rose a modest 0.2 percent in April, and that for the past 12 months this so-called core rate of inflation has risen just 2.8 percent.
That 12-month change in the underlying inflation rate is the lowest since a 2.4 percent increase was recorded for the 12 months ending in June 1966.
The only category to exhibit price pressures last month was medical care, which jumped by 0.6 percent, the steepest increase since a 0.7 percent rise last May.
Despite the encouraging overall performance, analysts said they remained convinced that the Federal Reserve will boost interest rates when central bank policy-makers meet Tuesday.
"The Fed is going to move. They aren't interested in the latest news on inflation. They are interested in showing that they can launch a pre-emptive strike against future inflation," said Kurt Karl, an economist at the WEFA Group in Bala Cynwyd, Pa.
The 0.1 percent overall increase in the CPI, which followed gains of 0.3 percent in both February and March, reflected a 0.4 percent drop in energy prices. Home heating oil fell 1.9 percent while gasoline prices at the pump were unchanged last month.
Food prices rose a slight 0.1 percent in April as a 2.3 percent drop in fruit and vegetable prices offset gains elsewhere.
In a second report Friday, the Commerce Department said business inventories dipped 0.2 percent in March. It was the first decline in three months and pushed the inventory-to-sales ratio to the lowest level in more than a decade.
The Commerce Department said inventories totaled a seasonally adjusted $869.5 billion, down from $871.1 billion in February.
At the same time, business sales rose 1.2 percent, to a seasonally adjusted $626.6 billion, up from $618.9 billion a month earlier. It was the seventh increase in the last eight months.
As a result, the inventory-to-sales ratio fell to 1.39, from 1.41 in February, lowest since at least 1982, the department said. That means it would take 1.39 months to exhaust stockpiles at the March sales rate.
The ratio is viewed as a positive sign, since further growth in sales likely would translate into new orders to replenish empty shelves and back lots.
by CNB