WASHINGTON (AP) Food, housing and health care costs ate into consumers wallets last month, but lower energy prices helped to moderate inflation.
The governments inflation gauge, the consumer price index, increased 0.2 percent in June, the Labor Department said Wednesday. The index was up 3.8 percent for the year.
The core rate of inflation, which excludes volatile energy and food prices, rose 0.3 percent in June compared with just 0.1 percent in May.
Federal Reserve Chairman Alan Greenspan told a House committee that the slowdown continues and may require another interest-rate reduction to turn around. Uncertainties surrounding the current economic situation are considerable, he said.
Stocks tumbled Wednesday, wiping out gains from the day before. The Dow Jones industrial average closed down 36 points.
The Federal Reserve has slashed interest rates six times this year to ward off recession. One of the reasons the Fed has been able to act so aggressively is because inflation hasnt posed a risk to the economy. The next meeting is Aug. 21.
One sector of the economy that has held up well is housing, and a separate report by the Commerce Department indicated it remains strong.
Housing construction rose 3 percent in June to a seasonally adjusted annual rate of 1.66 million. That followed a revised 1 percent decline in May.
This is a direct result of wealth created by the stock market bubble moving into housing, said Dean Baker, an economist with the Center for Economic and Policy Research. The impact of this effect has likely peaked.
Much of the economic slowdown comes from businesses rapidly and sharply cutting back on production because of sagging demand. That has spilled over into the labor market. The nations unemployment rate jumped to 4.5 percent last month.
American Express Co. said Wednesday it plans to slash another 4,000 to 5,000 jobs this year in addition to the 1,600 cuts announced earlier. Also Wednesday, Seattle-based Safeco said it plans to cut 1,200 jobs, or 10 percent of its staff, and grocery giant Albertsons said it will close about 165 stores in 25 states and eliminate up to 20 percent of managerial and administrative jobs.
Economists fear the labor market will continue to weaken, causing consumers to curtail spending and tip the economy into a recession. But they are hopeful a spending boost will be provided by lower interest rates and rebate checks that many taxpayers will start receiving this week.
Consumer energy prices overall dropped 0.9 percent last month, though they were still up 11.3 percent for the year.
The cost of electricity jumped 3.8 percent last month the largest increase on record. But natural gas prices were 5.6 percent less, the largest decline on record. The cost of gasoline also dropped 2.6 percent, the best showing since March, when prices dropped 3.8 percent.
Motorists this summer have been getting a break at the gas pump after world crude oil prices eased and refiners rushed to fill shortages that developed during the spring.
Gasoline prices dropped nearly 13 cents in the past three weeks as supplies rose. The average price of gasoline, including all grades and taxes, was $1.51 Friday down 12.8 cents since June 22, according to the Lundberg Survey of about 8,000 gas stations nationwide.
But prices increased in other areas of the economy.
Airline fares surged 5 percent last month, the biggest increase since October 1999, when prices jumped 5.3 percent.
Also, food prices were up 0.4 percent in June and up 3.7 percent for the year. Housing prices rose 0.4 percent after the same showing in May. Medicare care also jumped 0.4 percent, including prices for prescription drugs and doctor and hospital services.
Copyright © 2001, Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.