Resurgent Economy Cheers Policymakers; Inflation Index Dropped 0.1 Pct. in August
The latest news about the U.S. economy is so good -- in terms of low unemployment, rebounding growth, falling inflation, declining interest rates and record stock prices -- that private analysts and government policymakers alike are cheering.</br></br>Yesterday, the Labor Department added to the good news by reporting that August producer prices for finished goods fell 0.1 percent after three other similarly good months. Federal Reserve officials said the report indicates that last winter's inflation bubble, which could have derailed the economic expansion had it spread, has now burst.</br></br>Both the stock and bond markets rallied on the inflation news, with the Dow Jones average of 30 industrial stocks rising 42.27 points to close at a record 4747.21.</br></br>Bond prices also jumped, as interest rates on 30-year U.S. government bonds declined by nearly a tenth of a percentage point to 6.50 percent. Except for one day in June, that marks the lowest level for bond yields since early 1994. Short-term rates have also dropped recently, with yields on three-month Treasury bills down to 5.44 percent yesterday.</br></br>Laurence H. Meyer, an economic forecaster based in St. Louis, said the rest of this year and 1996 could be "one of the best, if not the best, late {business} cycle displays in the postwar period. Growth is at trend {2.5 percent}, the economy is near `full employment,' and inflation is modest and stable -- all features of a soft landing."