Consumer Price Index Rises; Housing Cools in July

W A S H I N G T O N, Aug. 16, 2000 -- Consumer inflation edged up a tame 0.2 percent last month, as prices for gasoline and natural gas eased after soaring in June, the Labor Department reported today.

Outside the volatile energy and food categories, consumerinflation’s “core” rate also rose just 0.2 percent, for a fourth consecutive month, suggesting that most other prices remain undercontrol. The seasonally-adjusted increases in both the overallConsumer Price Index, the most closely-watched inflation gauge, andits core rate matched many analysts’ expectations.

The July performance brought the core rate for the first sevenmonths of the year to an average 2.6 percent, up from 1.9 percentin the same period last year.

Data Should Calm FedThe inflation performance could help persuade Federal Reservepolicy-makers to leave interest rates unchanged at their meetingnext Tuesday.

After a big jump in June of 0.6 percent, the Consumer PriceIndex rose a seasonally adjusted 0.2 percent in July.

The jolt in June came from an expected leap in energy prices,which hit their highest point in 14 months with a 5.6 percentbounce.

By contrast, energy prices inched up only 0.1 percent in July,the new report showed.

Increase Was ExpectedThe mild increase in July was foretold last Friday in anothergovernment report showing that falling energy prices helped holdinflation in check at the wholesale level in July.

In that report, the Labor Department said that after a 0.6percent jump in June caused by soaring energy costs, July’sProducer Price Index, which measures inflation before it reachesthe consumer, remained unchanged.

The Federal Reserve has boosted interest rates six times overthe past 14 months in an effort to slow the economy and keepinflation in check. Many economists believe the Fed will leaverates untouched at next week’s meeting, preferring to wait and seewhether the rate increases it has already approved will beadequate.

Economists also believe surging energy prices will ease incoming months as oil-producing nations boost production. Still,some analysts worry to what extent existing energy price increasesmight eventually spill over and push up other prices for otherproducts.

In June, skyrocketing energy costs were reflected in highercosts for airline fares and other transportation prices.

Housing Starts Down AgainConstruction starts on newU.S. homes and apartments fell for the third straight month inJuly, the government said today in a fresh indicationthe housing market has cooled in response to higher interestrates.

The Commerce Department said starts fell 3.3 percent to aseasonally adjusted annual rate of 1.512 million units in Julyfrom a pace of 1.563 million units in the previous month. Thatwas weaker than the 1.555 million unit rate economists hadforecast in a Reuters poll.

July’s pace left housing starts 17 percent below a recentpeak, seen in February, and at their lowest level sinceNovember of 1997 when starts ran at a pace of 1.510 millionunits.

The latest data signalled that six interest rate hikes fromthe Federal Reserve over the past year, aimed at cooling theeconomy, were starting to take hold on the real estate market.