Las Vegas Sun

March 28, 2024

Consumer inflation flat in June

WASHINGTON -- Inflation pressures on the consumer were absent for a second straight month in June, reflecting another drop in energy costs, the government reported today.

The Labor Department said that its Consumer Price Index was unchanged in June after having posted a 0.1 percent decline in May. The good news in both months came from sharp declines in gasoline and other energy products.

But with oil prices in recent weeks hitting record highs, consumers are already seeing a new surge in gasoline pump prices which will likely translate into a jump in inflation pressures in July. Outside of food and energy, inflation was well contained in June, rising a slight 0.1 percent, the same increase as in May.

Meanwhile, retail sales jumped by 1.7 percent in June, nearly double what analysts had been expecting, as the return of attractive auto incentives and warmer weather sent consumers streaming into auto showrooms and shopping malls.

Auto sales advanced 4.8 percent, the biggest gain in 13 months. Excluding autos, retail sales were up a solid 0.7 percent, reflecting strong sales at department stores, specialty clothing stores and furniture stores.

The better-than-expected gain in retail sales followed a revised 0.3 percent decline in May, which had been the first drop in nine months. It was blamed on unusually cold weather in May which depressed demand for summer clothes.

Consumer spending is closely watched because it accounts for two-thirds of total economic activity. Analysts said the combination of strong consumer spending and low inflation readings should be welcome news at the Federal Reserve.

"This is likely to give the Fed some confidence that it may be close to hitting the sweet spot -- growth that is strong enough to be self-sustaining, but not so strong as to push up the underlying inflation rate," said Nariman Behravesh, chief economist at Global Insight, a Massachusetts forecasting firm.

On Wall Street, the good economic news bolstered investor confidence. The Dow Jones industrial average rose 72.21 points in midmorning trading.

In other economic news, the number of Americans filing new claims for unemployment benefits rose to 336,000 last week, the highest level in six weeks, the Labor Department reported.

The higher claims figure -- up 16,000 from the previous week -- was attributed to temporary layoffs in the auto industry as auto plants retooled for a new model year. There were also higher layoffs in other manufacturing industries such as textiles and furniture and in the service sector.

Last week's increase followed a rise of 9,000 in jobless claims the previous week. Even with back-to-back gains, the level of jobless claims remained at levels associated with continued healthy gains in employment.

So far this year, consumer inflation is rising at annual rate of 3.1 percent, compared to a gain of 3.3 percent for all of 2004.

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