Newspaper article THE JOURNAL RECORD

Inflation Takes Holiday; Sales Register Gains

Newspaper article THE JOURNAL RECORD

Inflation Takes Holiday; Sales Register Gains

Article excerpt

WASHINGTON (AP) _ Inflation disappeared in June _ the first time in more than two years that consumer prices did not increase. Retailers, meanwhile, registered moderate sales gains.

The U.S. Labor Department said Wednesday 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 percent, 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 percent, 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 percent in June, banished any inflation concerns lingering in the financial market.

Long-term interest rates, which can surge higher when investors are worried about inflation, fell on the bond market to record lows immediately after the price report was released. Stock prices rose.

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

"My best case is that the Fed does not do anything through the balance of the year," said economist Bruce Steinberg of Merrill Lynch.

Congress and the Clinton Administration are counting on low interest rates to keep the economy going at the same time they raise some taxes to reduce the federal budget deficit.

For the first half of 1993, consumer prices advanced at a seasonally adjusted annual rate of 3.1 percent, compared with 2. …

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