Consumer prices rose 0.2 percent last month after an increase of twice that size in September as energy prices dipped slightly and clothing cost increases moderated, the Labor Department reported yesterday.

Excluding the often volatile prices of food and energy items, the "core" portion of the consumer price index also rose 0.2 percent last month, after a 0.3 percent rise the month before.

In the first 10 months of this year, the core CPI has gone up at a 1.9 percent annual rate, compared with a 2.4 percent increase for all of 1998. The entire index is up at a 2.8 percent annual rate, with the difference due entirely to sharply rising oil prices. So far this year, prices of gasoline and home heating oil have increased at a 30.9 percent pace, the department said.

"There is no sign of a pickup in inflation," economist Gerald D. Cohen of Merrill Lynch & Co. in New York said after the report was released. "All of the major components of the CPI showed small increases with the exception of apparel prices, which rose 0.6 percent in October but are down 0.7 percent from a year ago."

Cohen said crude oil prices have gone up again since the prices of gasoline and heating oil were checked by the department last month, "portending further gains in the energy index." He noted that airline fares jumped 5.3 percent last month but added that fares are volatile, having fallen sharply in the two previous months.

As for the future course of prices, Cohen said, "we expect core inflation should remain quiescent for the remainder of the year and into 2000."

Interestingly, with energy prices up so much this year, the prices consumers are paying for goods of all types have increased more than prices for services since October 1998--a reversal of the normal relationship between the two sectors. Over that period, commodity prices are up 2.7 percent and services prices have risen 2.5 percent, with the latter figure almost constant throughout this year.

Like the impact of energy prices on the overall CPI, tobacco-product prices have had a major effect on the core portion of the index. Cigarette prices did decline 0.3 percent last month, but they went up 7.1 percent in September. In the past 12 months, prices of all tobacco products rose 31 percent, accounting for one-fourth of the total increase in the core CPI. If tobacco price increases--which have been largely due to efforts by tobacco companies to increase revenue to pay the enormous costs of settling major lawsuits brought by individuals and governments--are excluded, the core CPI is up 1.6 percent since October 1998 rather than 2.1 percent.

Meanwhile, the Commerce Department said that housing starts were virtually unchanged last month at an annual rate of 1.628 million units. That rate is below the monthly average of 1.654 million units for the July-September period and well below the pace of nearly 1.8 million units for the first three months of the year.

Rising interest rates on home mortgages have cooled housing sales and construction somewhat this year, but the sector remains very healthy, analysts say. In some parts of the country, shortages of construction workers have created a backlog in which building permits have been obtained but houses have not been started.

Builders have reported some decline in the number of prospective buyers visiting their model homes, and applications for new mortgages for purchasing homes have fallen. The cumulative decline so far hasn't been great, but some analysts expect it to continue.

"Our guess is that housing will slow slightly over the quarters ahead, but don't look for anything dramatic," said Ray Stone of Stone & McCarthy Research Associates, a financial markets research firm.

CAPTION: KEEPING COOL

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