Slower, But on Track

In a textbook recovery, it is usually the valiant consumer, checkbook and shopping bags in hand, who spends the way back to economic health, with industry dutifully tagging along behind. So it has been with the present post-recession recovery, at least until recently. In July, according to the Commerce Department, retail sales fell 1.2%, continuing a softening that began to appear in April. Industrial production rose by a scant .2% last month, the smallest increase in nine months. At the same time, the Consumer Price Index, the nation's principal barometer of inflation, rose .5% in July, which translates into an annual rate of 6.2%--the same as in June.

That rate was about as expected, reflecting mainly higher prices for gasoline, clothing, used cars and some other items. For the year ending in July, the C.P.I, rose only 5.4%--the smallest twelve-month increase since the days of wage and price controls in 1972 and early 1973. Most of that 5.4% rise was traceable to higher energy costs and the rising price of medical care; happily, the cost of food grew only 2% in the past year.

No Blood. In any case, a 5% or 6% inflation rate is consistent with the projections of both liberal and conservative economists for this stage in the recovery. "It just doesn't get your blood pressure up," says Washington University's Murray Weidenbaum, a member of TIME Board of Economists. Higher wholesale prices, in fact, often point to renewed industrial demand for key materials. U.S. Steel spokesmen say that the company's decision earlier this month to raise the price of sheet and strip products by 4.5% indicated, in part, its faith that steel users were prospering and could afford a higher price.

There is little indication that consumers are beginning to get jittery about prices again. "Disposable income is still very disposable," says Franklin Simon, president of Filene's department store in Boston. Some more numbers out of Washington support that view: the Commerce Department announced last week that the aggregate personal income of Americans rose 1% in July, largely because wages had grown more than expected. And when paychecks swell, those lines at the check-out counter are quick to grow too.

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