Inflation Up, Trade Deficit Down

Sept. 18, 2002

U.S. aerospace companies exported $3.31 billion worth of civilian aircraft in July, up nearly one-third from the previous month and the most since October 1998.

(CBS) Consumer inflation rose 0.3 percent in August, the largest advance in four months, lifted by higher prices for energy products, clothing and tobacco.

The advance in the Consumer Price Index, the government's most closely watched inflation gauge, followed a tiny, 0.1 percent rise in July, the Labor Department reported Wednesday.

Excluding energy and food prices, which tend to bounce around a lot from month to month, the "core" rate of inflation also rose by 0.3 percent in August, up from a 0.2 percent increase in the previous month.

In a related development, the U.S. trade deficit shrank 6 percent in July to $34.55 billion, led by record exports of U.S. autos and auto parts and high volumes of civilian aircraft and food, feeds and beverages.

Economists hope that the steady rise in exports could signal that better days are ahead for American manufacturers, the hardest hit sector in last year's recession.

The latest readings on inflation were slightly worse than the 0.2 percent rise that many analysts were predicting for both overall inflation and the core inflation rate.

The Federal Reserve, trying to restore the economy back to full health, has said economic weakness is a bigger risk for the economy than inflation.

In making that determination, Fed policy-makers held the door open to future interest rate reductions if economic conditions worsen.

So far this year, the Fed has decided to hold short-term rates at four-decade lows. Many analysts predict the Fed will do so again at its next meeting on Sept. 24.

The 0.3 percent rise in overall consumer prices in August was the largest increase since April, when they rose by 0.5 percent.

Energy prices last month jumped by 0.6 percent, following a 0.4 percent increase in July. Crude oil recently has been bumping up against $30 per barrel — as tensions between the United States and Iraq heightened worries about possible supply disruptions.

On the trade front, the decline in the deficit was the largest since the U.S. dollar began to weaken against other major currencies earlier this year.

U.S. manufacturers have pushed for a weaker dollar to make it easier to expand their overseas sales. The July trade gap was well below the average estimate of $37.05 billion by analysts surveyed before the report.

U.S. exports increased for the fifth consecutive month in July to $83.23 billion, up 1.3 percent from $82.17 billion in June and the highest since June 2001's $84.39 billion. Exports of autos and auto parts were a record $7.09 billion, while exports of food, feeds and beverages rose slightly to $4.31 billion, the highest level since Nov. 1997.

U.S. aerospace companies exported $3.31 billion worth of civilian aircraft in July, up nearly one-third from the previous month and the most since October 1998.

Imports fell 1 percent to $117.78 billion from June's $118.92 billion, the first drop after six months of gains.

http://www.cbsnews.com/stories/2002/09/11/national/main521618.shtml