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Reports show little progress

Two new government reports Wednesday showed the U.S. economy remained stuck in neutral last month with a lackluster increase in retail sales and a modest rise in wholesale prices.

The Labor Department reported that wholesale prices climbed 0.3 percent last month, pushed upward by higher costs of gasoline, tobacco and pork. Even with the September increase, the weak economy was keeping the annual rate of wholesale price increases at a modest 2 percent through the first nine months of the year.

Meanwhile, the Commerce Department said that retail sales edged up a smaller-than-expected 0.3 percent in September. Analysts said about the only source of strength was stepped up buying of construction materials in Florida and Louisiana to rebuild following Hurricane Andrew.

Even an upward revision of the August sales figures that showed they were flat rather than down 0.5 percent, as reported last month, did not shake analysts' views that the economy is going nowhere. They said voters are not likely to receive any last-minute good economic news between now and Election Day.

"The economy is just bumping along the bottom," said Norman Robertson, an economist at Mellon Bank in Pittsburgh. "This is not a recovery in any meaningful sense of the word."

Analysts said that both the retail sales report and the low inflation figure were depicting an economy with extremely weak demand that is keeping a lid on prices.

Such an environment normally would give the Federal Reserve room to cut interest rates further. While there were high expectations last week that the Fed would move for the 25th time since 1989 to cut rates, analysts said the chances of that occurring were growing slimmer, at least until after Election Day.

For his part, Federal Reserve Chairman Alan Greenspan told reporters in Tokyo on Wednesday that "we don't know" whether further rate cuts will be needed.

On Saturday, Greenspan had denied published reports that the Fed would delay any further rate cuts until after the election to make sure that the politically independent central bank did not give the appearance it was taking a last-ditch action to save President Bush's job.

Even with Greenspan's denials, analysts said each passing day made it more and more unlikely that the Fed would move to cut rates again until after the Nov. 3 election. They said the most likely opportunity was Nov. 6 when the unemployment report for October will be released.

"Greenspan can say what he wants, but the Fed has to be concerned about its credibility," said Campbell Harvey, an economics professor at Duke University. "Any action now would be discounted by the markets."

The 0.3 percent rise in wholesale prices followed even smaller gains of just 0.1 percent in July and August.

Based on the September report on consumer inflation, the government will announce the cost-of-living increases to be received by more than 40-million Social Security recipients in January.

Based on what inflation has done so far this year, economists were looking for an increase of around 3 percent in Social Security benefits, the smallest adjustment since a 1.3 percent rise in 1987.

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