THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: WEDNESDAY, June 15, 1994 TAG: 9406150484
SECTION: BUSINESS PAGE: D3 EDITION: FINAL
SOURCE: BY EDWARD KEAN, KNIGHT-RIDDER NEWS SERVICE
DATELINE: 940615 LENGTH: WASHINGTON
The Labor Department reported that consumer prices rose 0.2 percent in May, after edging up 0.1 percent in April. Excluding often-volatile food and energy prices, core consumer prices rose 0.3 percent last month, vs. a 0.2 advance in April.
{REST} The May CPI increase translates into an annual inflation rate of 2.3 percent, continuing the pattern this year of moderate consumer price increases. During the first five months of this year, the CPI has risen at a seasonally adjusted annual rate of 2.3 percent, compared with 2.7 percent for all of 1993.
``This is moderate inflation,'' said Donald Ratajczak, a Georgia State University economist. ``Right now, this is even slower than it was a year ago. . . . There's no evidence in this report we're about to see significant acceleration.''
Energy consumer prices fell 1 percent in May, led by a 1.8 percent drop in gasoline prices, after falling 0.4 percent in April. Excluding energy, consumer prices rose 0.3 percent, after being up 0.2 percent in April.
Medical care and apparel consumer prices both climbed 0.4 percent in May, and transportation prices fell 0.4 percent. Tobacco prices rose 1.3 percent in May.
The declines in energy and transportation costs are the largest since January 1992, a Labor official said.
Food prices rose 0.3 percent, led by a 2.4 percent gain in fruit and vegetable costs.
Despite the rise in commodity prices, those increases are not being fully passed on to consumers, the official said.
Inflation is likely to stay in check because wage pressures were limited and would remain that way because ``there isn't a sense labor has the upper hand'' in labor-management relations, said Christopher Low, economist for Hongkong Bank Group. Many economists contend wages are more important in determining inflation than prices for raw commodities.
Although jobs are becoming more plentiful, workers remain insecure, which should restrain wage pressures, said Marlene Grabau, economist for County Nat-West/-Washington Analysis.
Some analysts do project that consumer inflation will begin to edge up gradually in coming months, but they don't expect a major pickup.
``As we go forward, there will be a gradual acceleration of inflation up toward 3 percent and probably in 1995 a little above that - not a firestorm,'' said Paul Boltz of T. Rowe Price Associates.
Tighter labor markets and renewed strength in European economies should lead to the pickup, Boltz said.
Peter Skaperdas, economist for Griggs & Santow, offered a less upbeat view on the prospects for inflation.
Although there are no signs of acceleration in consumer prices, there are certain factors, such as rising prices for raw materials and slower delivery times for vendors, that suggest inflation ``certainly isn't going to decline and is likely to edge higher over the course of the year,'' he said.
Most analysts saw little immediate implications for the Federal Reserve from the consumer price report.
But Boltz said the economy's strength and the strong pace of growth in employment indicates the Fed will be boosting short-term interest rates again this year. He predicted the Fed will push up short-term rates another one-half percentage point by year-end.
{KEYWORDS} ECONOMY INFLATION CONSUMER PRICES by CNB