Inflation under control, figures show

January 16, 1993|By New York Times News Service

WASHINGTON -- Consumer prices rose by 2.9 percent in 1992, the lowest rate in six years, as inflation decelerated in nearly every major category, the Labor Department reported yesterday.

Even more impressive, analysts said, was that the so-called core inflation rate, which excludes food and energy, eased to 3.3 percent. This was the slimmest rise since 1972, when the economy was subject to price controls imposed by the Nixon administration.

Because food and energy prices often gyrate wildly, as they did in 1986 when the price of a barrel of oil collapsed into single digits, economists consider the core rate a better gauge of underlying inflation trends.

The year finished with the lowest inflation rate since July. In December, the Consumer Price Index rose only one-tenth of 1 percent, an increase that was heavily influenced by holiday discounting of women's and girls' clothing.

While the results reported yesterday came as no particular surprise, they represent powerful evidence that inflation is strongly in check.

In the Baltimore area, grocery prices declined 0.6 percent in December, the third consecutive decline, the Bureau of Labor Statistics said. Grocery prices in the Baltimore area have dropped 1.6 percent since September.

The figures on consumer prices followed a report Thursday showing that inflation at the producer, sometimes called wholesale, level was practically nonexistent during the autumn. In fact, goods at both the intermediate and crude stages of production fell during this period.

Though not representing sudden improvement, this week's results provide ammunition for those who have been urging President-elect Bill Clinton to decide on a hefty package of fiscal stimulation soon after taking office next week. Projections of enlarged budget deficits by the Bush administration last week had generated fresh fiscal caution in the Clinton camp.

The good inflation news is also likely to reassure the inflation hawks at the Federal Reserve as it approaches a crucial early-February meeting on the course of money policy. Some congressional Democrats and other Fed critics have been complaining about lagging growth in some of the broad gauges of the money supply.

Few people expect significant inflation pressures to reappear any time soon. Analysts cite, among other things, the continued slack in the economy, a condition largely unaffected by economic pickup of recent months.

"We continue to make progress" toward price stability, said David W. Mullins Jr., vice chairman of the Federal Reserve Board. "We see inflation coming down, even though the growth rate has clearly picked up," to more than 3 percent.

In a separate report yesterday, the Federal Reserve found that industrial production moved up three-tenths of 1 percent in December, the third straight gain, but that the operating rate of the nation's factories, mines and utilities edged up only to 79.3 percent, scarcely higher than July's 79.1 percent.

"If there are any skeptics left about the likelihood of continued low inflation in the next year, if not two, [yesterday's] number should help persuade them otherwise," said Robert Giordano, director of economic research at Goldman, Sachs & Co.

He calculated that if the economy's pace should pick up to 4 percent, more robust than all but one of 50 forecasters polled by Blue Chip Economic Indicators, it would still take 2 1/2 years for inflation to reaccelerate. For inflation to become worrisome within a year, Mr. Giordano added, the economy would have to roar ahead at a pace upward of 6 percent.

But the benefits of low inflation do not necessarily mean higher living standards for consumers. The Labor Department also calculated yesterday that average weekly earnings, adjusted for inflation, fell 1.3 percent in 1992.

Before seasonal and price adjustments, the average urban worker earned $369.84 a week last month, compared with $364 in December 1991.

Last year's 2.9 percent rise in the Consumer Price Index is the lowest since a 1.1 percent gain in 1986.

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