Consumer prices edge up modest 0.2% Second report shows housing increase 5.2%

July 17, 1991|By Jon Morgan | Jon Morgan,Evening Sun Staff

The nation's cost of living edged up 0.2 percent in June, bolstering the view of some economists that inflation appears to be under control as the recession winds down.

Figures released today by the Labor Department showed that for the first half of 1991, consumer prices increased at an annual rate of 2.7 percent, well below the 6.1 percent advance for all of 1990, the worst in eight years.

Declining energy costs offset a sharp rise in fruit and vegetable prices in June. The seasonally adjusted gain in the Labor Department's Consumer Price Index followed a 0.3 percent increase in May and an 0.2 percent rise in April.

In a related report today, the Commerce Department also announced that housing starts shot ahead 5.2 percent in June, the third straight increase, boosting the annual rate of new construction over the 1 million mark for the first time in seven months.

The Labor Department report showed declining energy costs offsetting a sharp rise in fruit and vegetable prices in June. The increase in the Consumer Price Index followed a .3 percent increase in May and a 0.2 percent rise in April.

The swing is largely attributable to oil prices, which are falling steeply after skyrocketing following Iraq's invasion of Kuwait.

But, food prices and so-called core prices -- excluding food and energy -- were both advancing at a slower rate this year than in 1990.

"I think that's good news. We're not going to have inflating prices as we come out of the recession," said William F. Treacy, economist for the Baltimore-based MNC Financial Inc.

Figures for the Baltimore metropolitan area show the region generally tracking the nation as a whole, with the exception of energy costs which appeared to catch up with increases the rest of the nation suffered the month before, according to Maureen Greene, a Labor Department economist.

Electricity costs rose as summer rates went into effect throughout the northeast, and gasoline prices were up 1.3 percent in June, vs. 0.4 percent for the nation as a whole, $H Greene said.

"The conventional wisdom is 'Oh good, inflation is down and the Fed has room to ease,'" said economist Cynthia Latta of $H DRI-McGraw Hill in Lexington, Mass. "I just don't subscribe to that. . . . That would undo all the good you've achieved with stringency."

On the housing front, analysts contend that sector of the economy hit bottom with an 847,000 annual rate in January but believe the recovery will be slow and bumpy, compared to the brisk pace following most other recessions.

Wire services contributed to this story.

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