THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, October 17, 1996 TAG: 9610170362
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: 59 lines
Higher food prices and one-time jumps in the cost of cars, clothing and air fares helped boost consumer inflation 0.3 percent in September.
Analysts said the increase would fade as the temporary irritants disappear.
Still, the moderate rise in the Consumer Price Index initially caused disquiet in the financial markets, exacerbated later by reports of escalating infighting among political factions in Russia.
Bond prices slumped after the inflation report but managed a mild rebound by the end of the day. The yield on the 30-year Treasury note - a key determinant of corporate and consumer borrowing costs - eased down to 6.85 percent from its 6.88 percent high for the day.
Stocks also ended higher: After an initial dip below 6,000, the Dow Jones industrial average rose 16.03 to 6,020.81, topping by almost 11 points Monday's record finish, the first-ever above 6,000.
The Labor Department noted Wednesday that September's gain in the CPI was steeper than the 0.1 percent increase in August but matched the 0.3 percent advance in July.
The latest data mean the nation's 44 million Social Security recipients will receive a 2.9 percent cost-of-living increase in their monthly benefit checks next year, the largest since a 3 percent advance in 1993. That will push the average monthly benefit up $21 to $745.
It also means the maximum monthly payment for 6.5 million individuals receiving Supplemental Security Income also will rise 2.9 percent, up $14 to $484. For a couple, the maximum goes to $726, from $705.
Consumer prices rose at a 3.2 percent annual rate during the first nine months of 1996. Excluding the volatile food and energy components, the so-called core rate of inflation was up just 2.8 percent. The CPI rose 2.5 percent for all of 1995.
``The water table is slightly higher, but we're well below flood stage,'' economist Stuart G. Hoffman of PNC Bank Corp. in Pittsburgh said of the latest price report. ``This is further evidence that consumer inflation remains locked in a 2.75 percent to 3 percent range.''
Cynthia Latta, an economist at DRI-McGraw-Hill, a Lexington, Mass., forecasting service, agreed that ``we might be seeing the leading edge of a little acceleration in inflation.''
She said, however, the report by itself will not persuade the Federal Reserve to raise interest rates to slow the economy.
Many analysts believe the economy has shown recent signs of moderating and does not need the braking effect of a rate increase.
Food prices rose 0.5 percent in September, led by a 2.6 percent jump in fresh fruit. Prices for pork were up 1.6 percent; poultry, 0.8 percent; and beef, 0.6 percent.
But fresh vegetable costs fell 4.1 percent, including declines of 3.7 percent for tomatoes and 0.7 percent for lettuce.
Energy costs went unchanged as drops of 0.7 percent for natural gas and 0.4 percent for gasoline offset increases of 4.5 percent in fuel oil and 0.2 percent for residential electricity.
The index was pushed higher by increases of 0.5 percent for clothing, 0.6 percent for new cars and 2.9 percent for air fares.
KEYWORDS: CONSUMER PRICE INDEX INFLATION by CNB