Americans' spendin power sank again in September as the Persian Gulf crisis pushed prices up a sharp 0.8 percent for the second straight month, the government said Thursday. Still, inflation not tied to oil prices remained relatively mild. If the Labor Department's Consumer Price Index continued increasing at the September pace for a year, it would produce an annual inflation rate of 9.5 percent. Most economists believe price increases - absent the outbreak of a shooting war - will return to a more normal level by the end of the year. The oil shock nevertheless has added a new burden for an economy that was already on the brink of recession. ``You take out energy and the numbers aren't that bad. But on the other hand, people have to buy the energy and it gives you an annual inflation rate roughly double the rate of wage growth,'' said economist Donald Ratajczak of Georgia State University. ``It means that people won't have a lot of money to spend on Christmas,'' he said. The ``core'' inflation rate - prices excluding food and energy - was 0.3 percent in September, down from 0.5 percent in August. For the first nine months of 1990, prices increased at an annual rate of 6.6 percent, well above the 4.6 percent increase for all of last year. The rate for all of 1990, if it comes in close to 7 percent as now expected, will be the worst since 1981, when prices shot up 8.9 percent. The pickup in inflation so far this year helped bring about the biggest boost in Social Security benefits in 8{ years. Based on Thursday's report, the government announced a 5.4 percent rise in benefits beginning in January for the 40 million Social Security recipients. In addition to boosting consumer inflation based on oil and various energy products, the Aug. 2 Iraqi invasion and its aftermath hurt the U.S. merchandise trade deficit. It rose 2.4 percent to a seven-month high of $9.3 billion in August. Increasing oil prices pushed imports to a record high, more than offsetting a modest rise in exports. The stock market shrugged off the news, with the Dow Jones average of industrial stocks advancing. Analysts said traders were doing some cautious buying in the belief that worries about the economy had gone to unjustified extremes. In a separate report, the Labor Department said Americans' average weekly earnings, after adjusting for inflation, increased 0.4 percent in September. Still, they were down 1.5 percent from a year ago. In the inflation report, energy prices in September jumped 5.6 percent, the worst rise on record since the department began tracking the sector in 1957. Gasoline soared 9.5 percent, the largest increase in 17 months, and fuel oil rose 15.9 percent. For August and September together, gasoline rose 17.9 percent and fuel oil was up 33.7 percent. Electricity and natural gas charges also rose, but less steeply. Analysts expect the bad news to continue through November or December, even if oil prices stabilize near where they are now - around $40 a barrel, double the July price. In the next few months, the oil shock probably will begin feeding through to chemicals, airline tickets and other energy-related products and services. But it probably will not produce a permanent increase in the inflation rate, said economist David Jones of Aubrey G. Lanston & Co., a government securities dealer in New York. ``We simply don't suffer this time around from the same kind of inflationary psychology as we did during earlier oil shocks in 1973 and 1979. In the `70s, consumers were buying in anticipation of price increases. Now, consumers are waiting for a bargain,'' he said. Jones said recent increases in consumer prices are great enough to cause the Federal Reserve to be cautious about stimulating the economy with lower interest rates but not so great as to prevent a quarter-point cut in short-term rates if Congress and President Bush agree on a plan to cut the federal budget deficit. In other details, the Labor Department said: -Food and beverage prices rose a moderate 0.3 percent last month, the same as August. -Medical care was up 0.7 percent, bringing prices 9.3 percent higher than a year earlier. -Clothing costs also were up 0.7 percent in September. Men's and boys' clothing prices fell, but women's, girls' and infants' clothing costs rose, as did the price of shoes. -New car prices edged up only 0.1 percent after remaining unchanged in August. Car dealers beset with lagging sales have been unable to wean the public from rebate programs and discounted financing. -Housing costs were up 0.4 percent, held back by a decline in hotel and motel costs, which had been rising steeply earlier in the year. The various changes put the index for all consumer items at 132.7 in September. That means a hypothetical selection of goods and services costing $100 in the 1982-84 base period, cost $132.70 last month, up $7.70 from a year earlier.
