Consumer Price Index Posts Biggest Advance Since June

W A S H I N G T O N, Oct. 18 -- Consumer prices jumped 0.5 percent inSeptember, the biggest advance since June, as energy pricesrebounded sharply, the Labor Department said today.

The increase in the Consumer Price Index, the government’s mostclosely watched inflation gauge, followed a 0.1 percent decline inAugust, which had been the first drop in 14 years.

In both August and September, the CPI was dominated by energymovements. After falling by 2.9 percent in August, energy pricesshot up 3.8 percent in September, the biggest advance since a 5.6percent surge in June.

The big rise in energy, which consumers have felt in sharplyrising gasoline prices and home heating oil costs, promptedPresident Clinton last month to order the release of oil from thegovernment’s Strategic Petroleum Reserve.

While so far, the steep increases have been mainly contained inthe energy sector, economists are worried about a spillover effectthat could send overall inflation higher, setting off alarm bellsat the Federal Reserve.

Housing Starts Modestly Higher

In a separate report, the Commerce Department said construction starts on newhomes and apartments eked out a small gain in September, adding to signsthe nation’s housing sector has been chilled by higher interestrates.

Housing starts rose 0.3 percent to a seasonally adjusted1.53 million a year — weaker than the 1.545 million rateforecast by Wall Street economists — after a slightly revised0.1 percent decline in August to 1.525 million a year. Startspeaked in February this year at an annual rate of 1.822 millionand have been on a steady downward trend since that time.

Regionally, September starts dropped 4.4 percent in theSouth — the nation’s largest housing market—to an annualrate of 671,000. They were down in the Midwest by 2.6 percentto 296,000 a year. But in the Northeast, September startsclimbed 8.1 percent to 160,000 a year and in the West they wereup 8.6 percent to 403,000.