updated 9/16/2004 9:34:26 AM ET 2004-09-16T13:34:26

Consumer prices rose just 0.1 percent in August, a sign that inflation poses no immediate risk to the economy.

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The over-the-month-increase in the Consumer Price Index, the government’s most closely watched inflation gauge, came after prices dipped by 0.1 percent in July, the Labor Department reported Thursday.

Excluding energy and food prices, which can swing widely from month to month, “core” prices also inched up by 0.1 percent in August for the third month in a row. That suggested that most other prices are remaining well behaved, analysts say.

Cheaper prices for clothes, cars and gasoline helped to temper price increases for medical care, some food items and some energy goods.

The inflation picture was slightly better than some analysts were expecting. They were forecasting a 0.2 percent rise in both the overall CPI and for core prices.

"I don’t see any significant danger that inflation is going to run away from us," said Anthony Chan, senior economist at JP Morgan Fleming Asset Management. The economic lull experienced in the late spring and early summer, economists said, made it harder for some companies to raise prices, thus improving the inflation climate.

Separately, new claims filed for unemployment benefits rose last week by a seasonally adjusted 16,000 to 333,000, the department said in a second report. Neither Hurricane Charley nor Frances effected the increase, a Labor Department analyst said. The 333,000 level of claims was still better than the 340,000 to 346,000 that some analysts were expecting.

The pace of layoffs has slowed over the last year. A year ago, new filings were at 401,000, a level associated with a weak labor market, compared with the current 333,000.

The latest batch of economic news comes with Election Day less than two months away. President Bush and Democratic rival John Kerry have markedly different views about how the economy and the nation’s job market are doing.

The economy hit a bit of a rough patch in the late spring and summer, but now appears to be gaining ground, Federal Reserve Chairman Alan Greenspan says.

Bush says the best way to strengthen economy activity and spur more job creation is to make his tax cuts permanent. Kerry says the president’s tax cuts have mainly benefited the wealthy, haven’t produced significant job growth and have plunged the government’s balance sheets deeper into the red.

The nation’s payrolls picked up in August, with the economy adding 144,000 positions, the most since May. Still, the economy has lost a net 913,000 jobs since Bush took office.

The Fed, however, is widely expected to boost short-term interest rates for a third time this year. That would raise a key rate to 1.75 percent, from 1.50 percent. Analysts say that rates, still quite low by historical standards, should go up because the economy no longer needs their bracing tonic.

Greenspan says widespread, unwanted inflation isn’t currently a danger to the economy despite high oil prices, which have dampened economic activity.

“Despite the rise in oil prices through mid-August, inflation and inflation expectations have eased in recent months,” Greenspan said last week. Crude prices climbed to record highs earlier this summer, topping $48 a barrel, but have moderated in recent weeks.

In August, energy prices dipped 0.3 percent, after a 1.9 percent decline in July. For both months, declining gasoline prices eclipsed higher costs for other energy products.

Food prices, meanwhile, edged up 0.1 percent in August, down from a 0.3 percent advance.

Elsewhere in the report: Clothing prices in August declined by 0.2 percent. New automobile prices dropped 0.3 percent and airfares fell 3.7 percent, the largest drop since June 1999. Medical care costs rose 0.2 percent and education costs went up 0.6 percent.

So far this year, consumer prices are rising at a seasonally adjusted rate of 3.7 percent, compared with an increase of 1.9 percent for all of last year. The pickup reflects higher energy prices.

Excluding food and energy prices, “core” prices in the first eight months of this year have gone up at a rate of 2.2 percent, compared with a 1.1 percent advance in 2003.

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