Economy Still Growing, but at Slower Pace

WASHINGTON — Cheaper gasoline and lower air fares helped keep consumer prices in check during May, the Labor Department said Tuesday, while factories churned out more new cars and other manufactured goods.

A series of reports from the government and the Federal Reserve Board suggest the economy continued to grow steadily, if at a slowing pace, with inflation muted enough to probably head off any imminent increase in interest rates.

The consumer price index edged up only 0.1% for the third consecutive month in May. News of the tame rise came on the heels of Friday’s report showing that wholesale prices dropped for the fifth straight month in May.

Separately, the Fed said industrial output rose solidly last month--by 0.4% after a 0.3% April gain.

And the rate at which factories operated crept up to 83.7% in May from 83.6% in April. It was the highest capacity use in more than 1 1/2 years, since the 83.9% rate in September 1995.

Still, analysts said the reports show the economy’s ability to grow at a healthy clip without sparking inflation, and they saw little reason for Fed policymakers to boost interest rates at their next meeting July 1-2.

A report from the Commerce Department showed the construction rate for new homes and apartments fell for a third straight month in May, down 4.8% to a seasonally adjusted annual rate of 1.397 million.

That followed revised declines of 0.7% in April and 4.8% in March, when builders pulled back after a surge in construction activity at the beginning of the year when the weather was exceptionally mild.

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Consumer Prices

Percentage change, month to month, seasonally adjusted:

May: +0.1%

Source: Bureau of Labor Statistics