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May 1994, Vol. 117, No. 5
T he Consumer Price Index for all Urban Consumers (CPI-U) rose 2.7 percent in 1993, its smallest annual rise since a 1.1-percent rise in 1986, and the second lowest rate since 1965.1 (See chart 1.) During the past 3 years, changes in energy costs have helped to hold down the overall rate of inflation. While prices for energy moved up slightly in 1992, energy prices in both 1991 and 1993 declined. Prices declined for tobacco and smoking products and moderated for medical care, contributing to the general slowing of consumer price increases in 1993. The rates of change for selected categories of expenditures over the past 10 years are shown in table 1.
The economy generally improved as 1993 progressed. The Nation's gross domestic product (GDP) rose at a faster rate each quarter; the 2.9-percent increase in GDP for 1993 as a whole was its best showing in 5 years. The unemployment rate, which was 7.3 percent in December 1992, fell to 6.4 percent in December 1993. The number of payroll jobs rose by about 2 million in 1993, as measured by the survey of establishments.
While output and employment grew in 1993, there was little evidence of increasing inflationary pressures. Total labor compensation costs paid by U.S. nonfarm business employers (which include wages, salaries, and benefits paid to their employees) increased 2.8 percent in 1993, after advancing 5.2 percent in 1992. Also, productivity was up 1.9 percent over the past year, offsetting part of the rise in compensation. As a result, labor costs per unit of output rose only 0.9 percent form the fourth quarter of 1992 to the fourth quarter of 1993. In 1993, the Producer Price Index moved up only 1.0 percent for intermediate materials, supplies, and components and 1.9 percent for capital equipment. In addition, long-term interest rates remained relatively low, keeping the cost of financing capital equipment purchases moderate.
This excerpt is from an article published in the May 1994 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 Annual percent changes are from December to December, unless otherwise noted.
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