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Inflation Cool, But U.S. Debt Piling Up

June 24, 1987

Undated (AP) _ Consumer prices rose at an annual rate of 4 percent in May, the slowest pace this year, according to a government report.

May’s 0.3 percent one-month rise in the Labor Department’s Consumer Price Index followed 0.4 percent increases in each of the three preceding months and a 0.7 percent rise in January, officials said Tuesday.

Through 1987′s first five months, consumer prices have risen at an annual rate of 5.6 percent - far above last year’s 1.1 percent clip but still well below the double-digit inflation at the start of the decade.

Economists said the dollar’s recent strength on foreign exchange markets has helped cool rising import prices while easing concerns about the return of spiraling inflation this year.

In other economic news, the Commerce Department said the nation owed the rest of the world $263.6 billion at the end of 1986, more than double the previous year’s total.

America’s foreign debt burden shot up 135 percent last year, outpacing the combined debt of Brazil, Mexico and Argentina, the report said.

Foreigners now own more in U.S. investments than Americans own in foreign investments, something that has not occurred since 1914.

Last year, foreign investment in the United States jumped 26 percent to $1.331 trillion, while American investment overseas posted a 13 percent increase to a new total at the end of the year of $1.068 trillion.

The Commerce Department also reported that new orders for ″big ticket″ durable goods edged down 0.1 percent in May, the first decline in four months.

The department said orders for durable goods, items expected to last three or more years, declined to $106.9 billion last month following a 0.7 percent April increase.

All of the weakness came from a 13.1 percent fall in orders for defense equipment, a highly volatile category that had posted three consecutive months of sizable increases.

Without the defense decline, durable goods orders would have risen 1.4 percent last month, the best showing since a 4.5 percent increase excluding defense in February.

In the financial markets Tuesday, stocks declined in active trading, ending a long advance as the support it had drawn from the stronger dollar and bond markets began to ebb. The Dow Jones average of 30 industrials fell 5.78 points to 2,439.73.

Bond prices also dropped slightly, and the dollar weakened in a burst of profit-taking in New York trading. Gold prices rose in reaction to the dollar’s decline.

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