Inflation rate is lowest in 11 years But real earnings of workers record biggest drop in months

Economy

October 17, 1998|By BLOOMBERG NEWS

WASHINGTON -- U.S. industrial production unexpectedly declined in September, while consumer prices rose at a 1.4 percent annual rate during the first nine months of the year, the lowest inflation rate in 11 years, it was reported yesterday.

Output at factories, mines and utilities fell 0.3 percent last month after rising 1.6 percent in August, figures from the Federal Reserve showed.

Last month's decline was the third in the last four months and completed the weakest quarterly performance since early 1991, when the economy was in recession. The drop resulted from "widespread" weakness in the manufacturing of big-ticket goods from autos to steel, the central bank said.

The Consumer Price Index (CPI), the nation's main inflation gauge, was unchanged in September for the first time in six months, after rising 0.2 percent in August, Labor Department figures showed. The 1.4 percent annual rate of increase for the first nine months of the year is down from a 1.8 percent annualized increase over the same period in 1997.

Separate reports showed workers wages fell in September, which might have contributed to a drop in consumer confidence.

Figures from the University of Michigan showed consumer confidence fell to 98.9 this month from 100.9 in September.

Average weekly earnings for U.S. workers posted the biggest drop in 17 months in September, according to Labor Department statistics. Real earnings fell a seasonally adjusted 0.6 percent last month after rising 0.4 percent in August.

For the third quarter, industrial production was unchanged. That was the weakest quarter since the last recession, when production dropped 8.3 percent in the first quarter of 1991, the Fed's statistics showed.

The report also showed that the plant-use rate, which measures the amount of industrial capacity in use, fell to 81.1 percent in September from a revised 81.6 percent during August.

Manufacturers are encountering "weak export demand and, maybe, weakening domestic demand," said Peter Kretzmer, an economist at NationsBanc Montgomery Securities in New York.

The CPI's core rate, which excludes often-volatile food and energy costs, rose 0.2 percent in September after rising 0.2 percent in August.

The core rate rose at a 2.4 percent annual rate in the first nine months of 1998, up from a 2.2 percent gain during the first nine months of last year.

Energy prices, which account for about a tenth of the CPI, fell 1.3 percent in September, and transportation costs fell 0.4 percent.

Food prices, which make up about a fifth of the CPI, were `D unchanged in September; housing costs rose 0.2 percent; and medical care costs rose 0.3 percent.

Pub Date: 10/17/98

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