US June Consumer Prices +0.6%; Consensus +0.5%
07/18/2000
Dow Jones News Services
(Copyright © 2000 Dow Jones & Company, Inc.)
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*DJ US June CPI Ex-Food & Energy +0.2%; Consensus +0.2%
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*DJ US June CPI Energy Prices +5.6%; Food Prices +0.1%
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*DJ US Real Average Weekly Earnings +0.1% In June
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=DJ Data Snap: June CPI Shows Core Inflation Under Control
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Consumer Price Index !Surprise: No !
June May !Trend: No core!
CPI Index +0.6% +0.1% ! inflation !
Core Index +0.2% +0.2% !Consensus: !
Energy +5.6% -1.9% ! +0.5% !
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By Henry J. Pulizzi and Joseph Rebello
WASHINGTON (Dow Jones)--Away from the nation's gas stations, U.S. consumers encountered little inflation at the retail level in June, reducing pressure on the Federal Reserve to raise interest rates next month.
Boosted by the biggest surge in energy prices in 14 months, the Consumer Price Index rose 0.6% in June, Labor Department said Tuesday. But the slightly stronger-than-expected increase, on the heels of a tame 0.1% advance in May, may not herald the onset of widespread price pressures. Outside of the volatile food and energy components, the CPI rose a mellow 0.2% in June for the third consecutive month.
The lack of core inflationary pressures should please financial markets, which have faced a slew of murky economic data. Those figures hint at a mild slowdown in consumer demand from the first quarter, but also suggest the nation's job market remains exceptionally tight.
With inflation seemingly under control, however, economists are divided on the outlook for monetary policy. Though many believe the Fed will resist the temptation to raise interest rates for the seventh time in 14 months when its policymakers next mees on Aug. 22, futures contracts on the key federal funds rate place 50-50 odds on a rate increase.
In his semi-annual report to Congress on Thursday, Alan Greenspan isn't expected to tip the central bank's hand. Instead, analysts say he'll highlight the inflationary threat posed by the nation's tight job market, while acknowledging the preliminary signs of economic moderation. He's unlikely to signal that the Fed has ended its tightening campaign because that could trip a bull run in stocks and bonds, potentially stoking a burst of consumer spending.
That would be an unwelcome development, especially amid signs that consumers were more free-spending in June than expected. Retail sales rose 0.5% in June, pushing analysts' estimates for second quarter consumption higher. And a University of Michigan survey released last week showed a mid-July pick-up in consumer sentiment.
Still, outside of energy recent inflation readings have been stable. In annual terms, the core index rose at a 2.4% pace, the same as in May. Overall consumer prices, however, were up 3.7% year-over-year in June, matching a nine-year high reached in March.
The Labor Department said the 5.6% increase in consumer energy costs in June included an 8.8% spike in gasoline prices and a record 7.8% rise in natural gas prices. At the pumps, gas prices soared to an average of $1.71 per gallon in June, but recently began to moderate and are down 5% this month.
The higher June energy costs showed little spillover into other sectors, the Labor Department said. Transportation costs, which are influenced by the price of energy, rose 1.8% during June, after falling 0.5% in May. Airline fares increased 1.5% in June.
Elsewhere in the core index, housing prices rose 0.5%, the largest increase since February. Medical care costs accelerated, rising at a 0.4% rate in June, the largest increase in three months. That included the biggest gain in the cost of hospital and related services since 1993, a 0.8% increase.
Clothing prices, however, declined for the third straight month, falling 0.6% in June after a 0.2% drop in May.
Food prices, meanwhile, decelerated, growing at a 0.1% rate in June after a 0.5% increase in May. Rising prices for beef, pork and vegetables offset declining fruit, poultry and dairy costs, the government said.
In a separate report, the Labor Department said average hourly earnings of U.S. workers, adjusted for inflation, rose 0.1% in June. The increase was caused by a 0.4% increase in average hourly earnings and a 0.3% rise in average weekly hours.
-Henry J. Pulizzi and Joseph Rebello; Dow Jones Newswires; 202-862-9255
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