Gas price dip drives down CPI

With Chicago area gas prices falling, consumer prices heredeclined in July while the national Consumer Price Index inchedslightly higher.

Chicago area consumer prices fell 0.8 percent last month to anindex reading of 174.4 from June, the U.S. Bureau of Labor Statisticsreported today.

The index stood 2.9 percent higher than July 1999.

Nationally, the CPI rose a tame 0.2 percent, as prices forgasoline and natural gas eased after soaring in June.

Peter J. Hebein, regional commission for the bureau in Chicago,said a downturn in gas prices was responsible for almost all of theJuly decline.

Component prices for Chicago area food and beverages wereunchanged for the month. Nationally, the news was almost as good.

Outside the energy and food categories, consumer inflation's"core" rate also rose just 0.2 percent, for a fourth consecutivemonth, suggesting that most other prices are under control.

The July performance brought the core rate for the first sevenmonths of the year to an average 2.6 percent, up from 1.9 percent inthe same period last year. The pickup in this year's prices resultsmostly from rising energy costs.

The inflation performance could help persuade Federal Reservepolicy-makers to leave interest rates unchanged at their meetingTuesday.

In another sign of a cooling economy, the Commerce Departmentreported today that housing construction plunged 3.3 percent in Julyto the lowest level in at least two years. It was the third straightmonthly decline.

Builders began work on new homes at a seasonally adjusted annualrate of 1.51 million units in July, below many economists' predictionof 1.58 million.

After a big jump in June of 0.6 percent, the Consumer Price Indexrose a seasonally adjusted 0.2 percent in July. The jolt in June camefrom an expected leap in energy prices, which hit their highest pointin 14 months with a 5.6 percent bounce. By contrast, energy pricesinched up only 0.1 percent in July.

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

Sun-Times Wire Services