Inflation Rate

WASHINGTON -- U.S. consumer prices rose a smaller-than-expected 0.2 percent in September, while manufacturing showed signs of slowing, further evidence inflation remains in check, government figures showed yesterday.The closely watched core rate of the consumer price index, which excludes food and energy costs, rose 0.2 percent in September. In August, the CPI rose 0.2 percent and core rate increased 0.1 percent, indicating the economy may finish the year with the lowest inflation rate in 11 years.

WASHINGTON -- The U.S. unemployment rate fell to 5.2 percent in March, its lowest level in five months, even as the economy added jobs at a slower-than-expected pace, the government reported yesterday.At the same time, last month's gain of 175,000 jobs -- down from an increase of 293,000 in February -- was accompanied by an acceleration in labor costs and record factory overtime pay, suggesting the inflation rate could be on the rise."Inflation is not down the road; inflation is right here," said Anthony Chan, chief economist at Banc One in Columbus, Ohio.

The economy unexpectedly grew at a slightly slower pace in the fourth quarter than previously estimated, and inflation, while subdued, was higher, according to government reports yesterday.The figures showed:The gross domestic product, the total output of goods and services, expanded at a 3.8 percent annual rate, down from the previous estimate of 3.9 percent. Analysts had expected a 4.0 percent gain.The price deflator, a measure of price increases, grew at a 1.5 percent pace in the fourth quarter.

NOW THAT the Constitution has again been spared a Balanced Budget Amendment that would have put fiscal policy in a straitjacket, Congress and the White House ought to get down to the business of actually balancing the budget. Fortunately, a golden ring is available if only politicians in both parties will grab it.All they have to do is insist that the government use accurate figures in computing the Consumer Price Index. The CPI tracks the inflation rate used in calculating cost-of-living adjustments for Social Security benefits and tax bracket adjustments.

WASHINGTON -- Producer prices unexpectedly dropped in January for the first time in more than two years while industrial output stalled -- more evidence America's economy is slowing while inflation remains in check, government figures yesterday showed.The Labor Department's Producer Price Index, which tracks prices paid to factories, farmers and other producers, declined 0.3 percent last month -- the first decrease since October 1994 -- after rising 0.6 percent in December. The index's core rate, which excludes food and energy costs, was unchanged in January from a month earlier, when the core rate fell 0.1 percent.

WASHINGTON -- The U.S. Treasury, in an offering that could ultimately make it less expensive for the government to borrow money, will issue the first $7 billion in 10-year inflation-indexed notes on Jan. 29.The new notes will be auctioned four times a year in denominations as small as $1,000. The first issue will settle Feb. 6 and mature Jan. 15, 2007.They have "enormous potential" for increasing middle-class savings and helping the Treasury when it restructures its borrowing, Treasury Secretary Robert E. Rubin said yesterday.

IF GOVERNMENT STATISTICS on the rate of inflation are grossly inflated, as a blue-ribbon group of economists now warns, why not fix them?The closely watched Consumer Price Index affects every American. It determines how much Social Security benefits increase year by year. Or how fast the Internal Revenue Service nudges citizens into higher tax brackets. Or what interest rates will be. Or whether a balanced budget can be attained. The obvious importance of the CPI is why it is so hard to fix.To achieve accurate data on the performance of the U.S. economy, government figures should reflect quality improvements, the trend toward discount buying and the substitution factor when specific prices shoot up.But the Washington Establishment is also acutely aware that explosive political issues and basic perceptions of the American condition are at stake.

FOR LUCKY BILL CLINTON, "happy days are here again." Although that old New Deal standby was hardly heard at the Democratic National Convention, its message resonates in the buoyant economic news driving the Clinton re-election campaign. With the unemployment rate at an eight-year low of 5.1 percent (compared to the 7.6 percent rate that helped send George Bush to defeat four years ago), the incumbent president is basking in a 55 percent approval rating for the way he has handled the economy.

EVERYONE KNOWS by now that when it comes to Social Security, Democrats and Republicans scamper away as fast as they can. Their fear of elderly voters easily outweighs their realization that something someday has to be done to bring this granddaddy of government entitlement programs into sync with fiscal reality. Yet both parties in seeking budget balance see promise in a backdoor move to cut the growth of Social Security benefits.Right now President Clinton and congressional Republicans agree on the need to revamp the Consumer Price Index so that it does not overestimate the inflation rate.

NEW YORK -- On the tax-cut tote board, the cut with the highest odds of success is the one proposed for investment profits, otherwise known as "capital gains." The average tax on certain capital gains would descend almost to zero, under the GOP proposal. Holders of profits in stocks and real estate would cheer.As a practical matter, however, this bill is a neutron bomb. Its appalling complications would add volumes to the tax regulations and hours to your paperwork. The cuts -- far too deep to pay for themselves in revenue growth -- are projected to add $54 billion to $61 billion to the federal deficit over five years.