Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, March 21, 1990                   TAG: 9003212270
SECTION: BUSINESS                    PAGE: A7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                 LENGTH: Medium

FEBRUARY RETAIL PRICES UP .5%

Meanwhile, the U.S. trade deficit widened sharply to $9.3 billion in January as record demand for foreign oil offset an all-time high in sales of American products overseas, the government reported.

The increase in the Labor Department's Consumer Price Index was about twice what had been anticipated and came on top of a weather-fueled 1.1 percent jump in January, the steepest in 7 1/2 years.

Taken together, the first two months of the year represent an annual inflation rate of 9.9 percent, compared with 4.6 percent for all of 1989.

"It's a nasty little number, worse than we thought it would be," said economist Robert Brusca of Nikko Securities Co. International Inc. "The problems we had in January still appear to be lingering in February."

White House press secretary Marlin Fitzwater, on the other hand, said that, "overall, we continue to believe that inflation is low and under control."

The report flustered financial markets, where stock and bond prices fell immediately after its release. Traders interpreted the still-high inflation as an indication the Federal Reserve Board likely would not lower interest rates in the near future.

Economists said it was difficult to sort out underlying trends because so many of the report's components were swung by special factors.

An earlier-than-usual start to the spring fashion season pushed clothing costs up 3.3 percent on a seasonally adjusted basis. It was the biggest one-month gain since the government began tracking such prices and represented about two-fifths of the overall February increase.

Fuel oil prices plunged 18.7 percent, a record since 1935, following a 26.3 percent advance in January. A freeze in late December had caused shortages but unusual warmth this year quickly produced a fuel glut. Other energy prices and food costs, however, did not rebound.

On the trade deficit, the January gap between imports and exports was 20.5 percent larger than December's $7.7 billion deficit, which had been the best monthly showing in five years.

The Bush administration, which is counting on further improvement in trade to boost economic growth this year, sought to play down the huge December-to-January swing.

But private economists were more pessimistic, warning that the United State's trade woes could deepen this year because of a growing dependence on foreign oil and a stronger U.S. dollar.

The rise in the dollar makes imports less expensive and therefore more attractive to U.S. consumers while making U.S. products less competitive on overseas markets.

At the White House, Fitzwater emphasized the robust growth in exports while minimizing the overall deficit figure.

"Everyone seemed to realize they couldn't maintain that low [deficit] level and so it was expected that there would be an increase in January," he said.