Consumer prices were unchanged last month for the second month in a row, leaving them a modest 2 percent higher than they were a year earlier, as the United States continued to enjoy an economic expansion marked by strong growth and low inflation, the Labor Department reported yesterday.
"This is the first time in 13 years that there has been no consumer price [index] increase over a two-month period," Labor Secretary Alexis M. Herman said in a statement.
"The performance of our economy remains outstanding, with high growth, low unemployment, rising incomes and price stability."
The report further eased concerns generated by an exceptionally hefty 0.7 percent jump in the CPI in April, which caused some analysts and policymakers to fear that inflation might be taking off.
"I'm enormously comforted by this most recent number and the one before it," J. Alfred Broaddus, president of the Richmond Federal Reserve Bank, said in an interview.
"I was worried by the number in April. I knew it might be an anomaly, but now it's clear that it was."
White House economist Janet L. Yellen noted that the low level of inflation allowed inflation-adjusted wages to increase 1.7 percent over the past year -- "the fourth consecutive year of increase after nine years of stagnation. The happy combination of solid real wage gains together with low and stable inflation is supported by strong gains in productivity."
According to the Labor report, the "core" portion of the CPI, which excludes volatile food and energy prices, rose 0.1 percent for the second month in a row, after a large 0.4 percent increase in April. The core CPI, which many economists regard as a better measure of underlying inflation pressures in the economy than the overall index, was 2.1 percent higher last month than in June 1998.
If prices of tobacco products are taken out along with those of food and energy items, that version of the core CPI rose only 1.6 percent in the past 12 months, the smallest such increase during the current economic expansion -- indeed, the smallest since the early 1960s.
Because prices for services of various types normally rise faster than those of goods, some analysts track prices of services, excluding natural gas and electricity bought by households. Last month, that portion of the CPI -- which covers slightly more than half of the index -- rose 0.1 percent and stood 2.6 percent higher than it did a year earlier. That, too, was the low for this economic expansion and solid evidence that firms providing services are finding ways to hold down their costs.
But Kenneth T. Mayland, chief economist for Key Corp., a Cleveland-based nationwide financial services firm, cautioned that while June was "another very good month in terms of inflation performance . . . nobody should get the impression that we are in a zero inflation environment."
Mayland said inflation has remained so uncharacteristically low eight years into an economic expansion for a variety of reasons, including application of major technological advances that have boosted labor productivity and allowed firms to keep tight control of their costs. Increased competition from foreign producers has also played a role.
But Mayland expects inflation to drift upward to around a 2.5 percent rate as a result of rising medical care costs -- they rose 0.4 percent last month and were up 3.9 percent in the past 12 months -- higher housing costs, and perhaps further increases in oil and other energy prices.
With that sort of concern in mind, Federal Reserve policymakers raised short-term interest rates by a quarter of a percentage point on June 30 in what Fed officials described as a "preemptive" action to keep inflation from accelerating later this year or in 2000.
A number of analysts said yesterday that additional benign inflation reports such as yesterday's might forestall further rate increases.
Economist Stan Shipley of Merrill Lynch & Co. in New York said such reports may be on the way.
"Core inflation should remain quiescent in the second half of the year," Shipley said.
"In six of the last seven years, the core CPI climbed at a slower pace [in the second half] than in the first half."
Last month prices of items in the CPI's sections for food and beverages, recreation, and education and communication were all unchanged. Prices for the housing component increased 0.2 percent, as did the "other goods and services" category.
While medical care costs were up 0.4 percent, apparel prices fell by that amount and those in the transportation category were down 0.6 percent. The latter fell because of declines in gasoline prices, which dropped 3.2 percent, and air fares, which were off 4.8 percent.
Also in the transportation section, new-vehicle prices fell 0.1 percent as prices for used cars and trucks jumped 0.9 percent.
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