Inflation fears in US as costs rise

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The Independent Online
A fresh batch of indicators yesterday showed the US economy was on course for another year of steady if unspectacular growth, but some economists were growing uneasy that higher commodity and petrol prices may soon push inflation higher.

The latest evidence has come from the Commerce Department, whose index of leading indicators rose 0.2 per cent in March, following its 1.3 per cent jump in February, the largest increase in 20 years.

Although the rise was less than the 0.3 per cent expected by Wall Street, it gives the lie to fears circulating in late 1995 that the economy was heading for a serious slowdown - possibly even a recession. Most predictions are of 2 per cent growth in GDP in 1996, around the same as last year.

In a separate report yesterday, the department said spending on new private and public building projects soared by 3.1 per cent in March, the biggest such single-month increase since early 1992. The burst of activity, though a rebound from January and February when bad weather had a serious impact, caught analysts by suprise.

Separately, the Conference Board business research group reported that its closely watched index of consumer confidence jumped to 105.3 in April from 98.4 the previous month. The index has not been that high for six years, shortly before the 1990/91 recession, and the increase shows that public worry about jobs and corporate downsizing is receding.

If anything now the worry here is over renewed inflation, fuelled by increases in commodity prices. Months of drought have pushed grain prices sharply higher, while petrol prices, driven by refinery stoppages, and a tight global market after the exceptionally severe winter, are 10 per cent higher than a year ago.

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