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Consumer Price Index Stable in June : Economy: Report marks the first month of no increase in more than two years. Meanwhile, retailers post modest gains.

July 15, 1993|From Associated Press

WASHINGTON — Inflation disappeared in June, the first month in more than two years that consumer prices did not increase. Retailers, meanwhile, registered moderate sales gains.

The Labor Department said Wednesday that its consumer price index was unchanged last month, helped by steep declines in fruit and vegetable prices. It was the best showing since March, 1991, at the end of the recession.

Retail sales rose a modest 0.4%, the third straight advance, to a seasonally adjusted $171.9 billion, the Commerce Department said.

Together, the two reports portrayed an economy that is growing but not robustly enough to push prices up.

"There's no boom, no bust. It's not very exciting, but it's better than a kick in the teeth," said economist Paul W. Boltz of T. Rowe Price Associates in Baltimore.

In May, consumer prices had risen only 0.1%, but reports earlier in the year had fanned fears on Wall Street that inflation would accelerate.

Wednesday's figures, combined with a report a day earlier showing that wholesale prices dropped 0.3% in June, banished any inflation concerns lingering in the financial markets.

Economists said the Federal Reserve Board, which had been prepared in May to nudge short-term interest rates higher, now will probably keep rates steady for some months.

For the first half of 1993, consumer prices advanced at a seasonally adjusted annual rate of 3.1%, compared to 2.9% for all of 1992. Economists are predicting a slight acceleration to about 3.3% next year.

In June, prices--excluding food and energy--rose just 0.1%. Economists look to this "core" inflation rate as a more accurate gauge of underlying inflation pressures. Food prices fell 0.4% and energy prices declined 0.2%. Vegetable prices plummeted 11.9%, the steepest drop in 13 months.

Despite the favorable inflation news, the Labor Department said inflation-adjusted earnings of non-supervisory workers fell 1% in June, nearly reversing a 1.1% gain in May. Hours worked in June fell 0.9%, and average hourly earnings edged down 0.1%.

In yet another report, the Commerce Department reported that the profits of major U.S. retailers declined in the first quarter, reflecting the sluggish pace of sales.

After-tax profits for retailers with assets of $50 million or more declined to 0.8 cent per dollar of sales in the first quarter, from 1.4 cents per dollar of sales in the fourth quarter of 1992.

However, after-tax profits were 1.2 cents higher than the same period a year earlier.

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