WASHINGTON - U.S. consumer prices excluding food and energy rose at the slowest rate in 34 years last year, even as the economic expansion showed signs of accelerating.
"We continue to have the most amazing combination of robust growth and modest inflation," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa. "How long that will last we don't know, but let's enjoy it while we can."
The consumer price index's core rate rose 1.9% last year - the smallest gain since a 1.5% increase in 1965 - after a 2.4% rise in 1998, the Labor Department said Friday. Rising energy prices lifted the overall CPI last year by 2.7%, more than the 1.6% increase in 1998.
U.S. industrial production rose 0.4% in December, matching November's increase, Federal Reserve figures showed. And the Commerce Department said business sales surged 1.3% in November, more than doubling October's 0.5% gain and the largest since a 2% rise in August 1995.
Still, Federal Reserve Chairman Alan Greenspan's comments last week suggested the Fed may be less worried than some investors feared about the economy's overheating. Analysts said a probable quarter-point interest rate increase next month may not be immediately followed by more. The inflation report and Mr. Greenspan's speech take "a lot of the probability of a guaranteed March increase away," said Paul Christopher, an economist at A.G. Edwards & Sons in St. Louis.
Consumers are confident the economic expansion, now completing its ninth year, will break a 1960s-era record for longevity next month, according to a University of Michigan survey. Its preliminary index of consumer sentiment rose to an all-time high of 111.4 this month from 105.4 in December. The survey has been conducted since 1979.
- Bloomberg News