ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, February 28, 1996 TAG: 9602280070
SECTION: BUSINESS PAGE: B6 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Bloomberg Business News
A key inflation reading declined in January and retail sales fell for the month, signs that the Federal Reserve has a free hand to cut interest rates again if needed to jump start U.S. economic growth.
``There are no signs of inflation in the pipeline,'' said Scott Brown, an economist at Raymond James & Associates in St. Petersburg, Fla.
Still, a later report that consumer confidence had surged in February spooked investors, raising fears that the economy might rebound fast enough from its winter slump to limit the number of Fed rate cuts in the months ahead.
Excluding often-volatile food and energy costs, prices paid to producers fell 0.1 percent in January - the first such decline since October 1994. That followed a rise of 0.2 percent the previous month.
The overall index rose a smaller-than-expected 0.3 percent, as falling food and car prices offset the biggest jump in gasoline costs since Iraq's invasion of Kuwait in 1990, the Labor Department reported.
In a separate report, the Commerce Department said retail sales fell 0.3 percent in January - the first loss in three months - as auto dealers reported weak demand. Building materials and furniture sales also declined.
The Conference Board said Tuesday that its index of consumer confidence unexpectedly rebounded to 97.0 in February from a revised 88.4 in January, the first increase since November.
``People are probably hoping strength in the stock markets and corporate profits will contribute to an economic upswing,'' said economist Richard Yamarone at Mountain Econometrics in Maplewood, New Jersey.
Analysts had expected a 0.5 percent rise in the January producer price index and a 0.2 percent increase in the core rate. Prices rose 0.6 percent in December, first reported as a 0.5 percent rise.
Wholesale food prices fell 0.2 percent, while prices for passenger cars dropped 1.5 percent - their biggest decline since October 1994.
Energy costs rose 2.7 percent as cold weather spurred demand and gasoline prices soared.
Still, analysts said prices overall aren't likely to accelerate soon, with the weather warming and demand for energy declining. Nor are wages or other commodity prices likely to spark inflation any time soon.
The 0.3 percent decline in retail sales was in line with expectations. It followed a revised increase of 0.6 percent in December. Excluding motor vehicles, the January sales total was unchanged after rising 0.3 percent in December.
Sales of big-ticket durable goods such as autos, appliances and furniture dropped 1.0 percent, while sales of non-durable goods such as clothing rose 0.2 percent. Auto sales alone dropped 1.2 percent.
Wal-Mart Stores, the world's largest retailer, said Tuesday its fourth-quarter earnings fell 8.5 percent due to weak holiday sales, severe winter weather and higher costs. The decline ends a streak of 99 straight quarterly increases for the discount retailer.
LENGTH: Medium: 63 lines ILLUSTRATION: GRAPHIC: Charts by AP. 1. Retail sales. 2. Consumer confidence.by CNB3. Producer prices.