BLS Daily Report boundary="---- =_NextPart_000_01BD21A3.6BE138B0"

[Richardson_D <Richardson_D@xxxxxxx>]

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BLS DAILY REPORT, WEDNESDAY, JANUARY 14, 1998

RELEASED TODAY:  The U.S. Import Price Index fell 0.6 percent in
December.  The decrease was attributable to the continuing decline in
nonpetroleum prices, as well as the recent downturn in petroleum prices.
The U.S. Export Price Index also fell in December, decreasing 0.4
percent ....

__The CPI-U rose 0.1 percent in December, seasonally adjusted, and for
1997 the index rose just 1.7 percent, the lowest yearly increase since a
1 percent rise recorded in 1986 as a result of falling oil prices, BLS
reports ....The medical care index jumped 0.5 percent in December,
following an increase of 0.3 percent in November, raising concerns among
economists of returning high inflation in this sector.  But BLS
economist Patrick C. Jackman told BNA that the large increase in
December could be due to the fact that many hospitals posted new prices
in December, a month earlier than normal.  If the index increases at the
same or higher rate in January, however, Jackman said it could indicate
that medical inflation has bottomed out ....Following a several month
trend, new vehicle puchase costs fell 0.2 percent in December and 0.9
percent for 1997, the biggest decline since 1971, when federal excise
taxes were removed, Jackman told BNA.  The slight deflation in the new
car category most likely is due to an oversupply of cars and because
individuals are holding onto their cars for longer periods of time, he
said.  Airline fares fell 1.4 percent in December after declining 3.9
percent in the previous month.  The drop indicates that consumers were
offered extremely attractive airfares over the holidays, Jackman said
(Daily Report, page D-1).
__Consumer prices at 11-year low.  Analysts say inflation is likely to
fall further ....An economist at Salomon Smith Barney said, "We've got a
huge head wind against inflation this year."  That "head wind," which
has caused his firm to lower its 1998 inflation forecast to 1.5 percent,
includes expectations of slower U.S. economic growth, falling worldwide
demand that is pushing down commodity prices, a rising value for the
dollar that is reducing the cost of imported goods and services, and,
beginning this month, changes in the way in which the CPI is calculated
.....(Washington Post, page D9).
__Inflation, once the bane of the economy but these days only a minor
irritant, almost disappeared last month, and for all of 1997 was the
lowest in 11 years ....Analysts think prices of commodities and
manufactured goods could decrease ....(New York Times, pages A! and D2).

__Rock-bottom inflation means far more to Americans than simply cheaper
apples at the market.  The CPI is used to adjust much of what goes into
and comes out of people's wallets.  In 1998, analysts said, income-tax
brackets probably won't rise as much as in past years because they are
linked to the CPI.  That means that if a worker gets a sizable raise
this year, he is more likely to bump up into a higher tax bracket and to
have more of his pay taken away.  Federal benefit payments also are tied
to the cost of living - so Social Security recipients and veterans won't
see their checks fatten up much ....Of course, people living on Social
Security and the like will, presumably, be able to buy more goods with
the money they have, because prices aren't rising much ....Although
people typically cheer low inflation, it's not necessarily great news
for workers whose union contracts specify that their pay be adjusted
according to annual CPI increases ....But many large companies, analysts
said, automatically raise wages 3 to 4 percent annually - a rate that
didn't seem so great in 1996, when the CPI climbed 3.3 percent.  It
looked a lot better in 1997 ....Small businesses also stand to benefit.
For one thing, many have real-estate leases tied to the CPI ....(Wall
Street Journal, page A2).

The real weekly earnings of the average U.S. worker dropped 0.6 percent
in December, but rose 1.9 percent, seasonally adjusted, in 1997, BLS
reported ....(Daily Labor Report, page D-18)_____Wage gains, while
accelerating somewhat, have remained relatively limited ....Economists
expect wages to rise at a faster pace this year, as employers scramble
to fill jobs at a time of low unemployment ....New York Times, page D2).


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