Newspaper article THE JOURNAL RECORD

Latest Data Confirms Strong Economic Growth, Low Inflation

Newspaper article THE JOURNAL RECORD

Latest Data Confirms Strong Economic Growth, Low Inflation

Article excerpt

WASHINGTON (AP) -- Inflation remained benign last month despite the worst spike in gasoline prices since the Persian Gulf War. At the same time, factories churned out their largest production increase in 16 months.

"The best of all possible worlds continues," explained economist Lynn Reaser of Barnett Banks in Jacksonville, Fla. "The economy remains well-balanced with strong growth but low inflation."

Declines in clothing costs, car prices and airline tickets helped hold the overall increase in consumer prices to a moderate seasonally adjusted 0.2 percent in August, the Labor Department said. They counterbalanced big increases for gasoline and fruit and vegetables. For the first eight months of this year, the Consumer Price Index has been rising at an annual rate of just 1.6 percent, less than half the 3.3 percent increase in 1996. Excluding energy and food, which tend to jump around from month to month, prices rose a scant 0.1 percent in August. They're increasing at a 2.2 percent rate so far this year, even better than the 2.6 percent rise for all of last year. Bond prices shot up after the report's release, pushing down the yield on the 30-year Treasury bond -- a barometer of mortgage rates and other consumer borrowing costs -- to 6.41 percent, from 6.57 percent a day earlier. And the report left economists betting Federal Reserve policy- makers would find little need to increase short-term interest rates at their next meeting on Sept. 30. But they said a rate increase remains possible after either the Nov. 12 or Dec. 16 meeting. "If the data plays out as they did today, the Federal Reserve will never have to raise interest rates," said economist Allen Sinai of Primark Decision Economics in New York. "The question is, will the data continue to show the same pattern? Probably not." Analysts have been watching closely -- mostly in vain -- for signs the strong economy is pressuring inflation higher. But mildly worrisome readings on wages and factory operating rates emerged Tuesday. According to the Labor Department, inflation-adjusted weekly earnings jumped 0. …

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