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Energy Costs Lead 5.4% Rise in Inflation

July 22, 1987|Associated Press

WASHINGTON — Consumer prices, paced by a rebound in energy costs, rose at an annual rate of 5.4% for the first half of 1987, the government said today.

That gain--the steepest since the first half of 1982--compares to the minuscule 1.1% inflation rate at the retail level for all of 1986 and suggests that inflation this year likely will be about a full percentage point above the roughly 4% rate that prevailed from 1982 through 1985.

For June, prices rose a moderate 0.4% as costs of gasoline and food rose significantly.

That gain, equivalent to an annual inflation rate of 4.3%, followed a 0.3% rise in May and 0.4% increases in each of the preceding three months. Prices had risen 0.7% in January.

Gasoline prices rose 1.4% in June, more than triple the 0.4% rate in May. Electricity costs were up 2.5%.

For the first six months of 1987, energy costs rose at an annual rate of 16.7%, regaining most of the sharp 19.7% decline of the year before.

Food prices were up 0.7% in June after a 0.5% rise in May. Prices rose significantly last month for beef, pork, fruit and vegetables. So far this year, food prices have risen 4.4%.

Food and energy costs are expected to moderate in the months to come. Subtracting food and energy, consumer prices rose 0.2% in June.

Most economists now say that a major resurgence of prices, thought possible just a few months ago, seems doubtful for the rest of 1987.

One reason for economists' new optimism about inflation is the recent firming of the U.S. dollar against other major currencies, recovering from a nose-dive that had threatened to sharply erode Americans' purchasing powers.

A weaker dollar could help ease this nation's trade deficit, a record $166.3 billion last year, by making foreign goods more expensive at home and U.S. goods more competitive abroad. But too fast a fall in the currency could trigger an inflationary spiral.

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