Consumer prices up slightly - East Valley Tribune: Business

Consumer prices up slightly

Font Size:
Default font size
Larger font size

Posted: Thursday, July 17, 2003 6:22 am

WASHINGTON - Consumer prices rose modestly in June and manufacturers boosted production by the largest amount since the beginning of the year, a pair of hopeful signs for the economy’s revival.

The 0.2 percent advance in the Labor Department’s consumer price index for June was the first increase since March. That eased — but didn’t erase — concerns that the country could be headed for deflation, an economically dangerous long-term slide in prices, analysts said. Consumer prices decreased by 0.3 percent in April and were flat in May.

A report from the Federal Reserve showed factory output increased by a solid 0.4 percent in June, the second month in a row that production went up and the best showing since January. Automobiles, home electronics, furniture and chemical products each posted production gains in June, encouraging news for the nation’s manufacturers, which have been hardest hit by the economy’s woes.

The latest batch of economic reports released Wednesday ‘‘raised hopes that the economy is getting back on a healthy, noninflationary growth track,’’ said Ken Mayland, president of ClearView Economics.

But the reports failed to lift stocks on Wall Street. The Dow Jones industrials lost 34.38 points to close at 9,094.59.

Wednesday’s consumer price index report ‘‘really does validate the Fed’s view that it can keep interest rates low for some time without worrying too much about inflation,’’ said Stephen Cecchetti, economics professor at Brandeis University.

The Federal Reserve on June 25 cut a key interest rate by one-quarter percentage point to 1 percent, a 45-year low. The Fed reduced this rate to rev up economic growth to prevent deflation.

Economists believe the Fed probably will hold rates steady at its meeting on Aug. 12.

By then, the combination of President’s Bush latest round of tax cuts and super-low interest rates should help perk up the economy by motivating consumers and business to spend and invest more, economists said.

‘‘Business is starting to pick up,’’ declared David Huether, chief economist at the National Association of Manufacturers.

  • Discuss